Liz Truss mulls £100BILLION package to freeze energy bills
Liz Truss mulls £100BILLION package to freeze energy bills as gas prices soar another 30% after Russia shuts down pipeline – with Chancellor-in-waiting Kwasi Kwarteng scrambling to reassure markets about government’s debt mountain
- Liz Truss is expected to be named as the new Conservative leader this afternoon
- Signs she is planning to freeze energy bills with massive £100billion package
- Gas prices have soared again after Russia closed down a key pipeline to Europe
Liz Truss is mulling a £100billion package to freeze energy bills as she braces to be named the UK’s next PM.
With the results of the Tory leadership contest due at lunchtime, Ms Truss has vowed ‘immediate’ action to ease the pressure on struggling families.
Speculation is mounting that she will opt for a bold furlough-style move – possibly by loaning companies money to hold down costs.
The plan emerged as wholesale gas prices soared again this morning, by around 30 per cent, following Russia’s decision to shut down a key gas pipeline.
Chancellor-in-waiting Kwasi Kwarteng has already been scrambling to reassure markets that although government borrowing will be ‘looser’ it will remain ‘responsible’. Ms Truss has also promised a wave of tax cuts aimed at boosting economic growth.
Liz Truss has vowed ‘immediate’ action to ease the pressure on struggling families
The plan emerged as wholesale gas prices soared again this morning, by around 30 per cent, following Russia’s decision to shut down the key Nord Stream 1 gas pipeline
Energy bills are set to soar again in October, with fears many families will be unable to pay
Ms Truss told the BBC yesterday that she will reveal fresh supports for struggling households within a week, but refused to spell out details.
‘Before you have been elected as prime minister, you don’t have all the wherewithal to get the things done,’ she told the Sunday with Laura Kuenssberg programme.
‘This is why it will take a week to sort out the precise plans and make sure we are able to announce them. That is why I cannot go into details at this stage. It would be wrong.’
British energy producers witnessed another huge rise in wholesale prices today, with gas prices surging by 20 to 30 per cent this morning.
The increase comes after a last-minute decision by Russia’s state-backed energy firm Gazprom to block the reopening of the key Nord Stream 1 pipeline to Europe.
The UK natural gas price was at £4.96 per therm this morning, up 86p or 21 per cent. At the start of 2021 it was at just 40p per therm. The price touched £7 per therm last week.
And the leading European benchmark Dutch TTF October gas contract rose by €62 (£52.53), or 30 per cent, to €272 per megawatt hours (MWh) by about 7.30am today, reversing losses seen last week.
Nord Stream 1 is the biggest gas link from Russia to Europe, supplying around 55billion cubic metres per year.
While the UK receives only 4 per cent of its gas from Nord Stream 1, other countries such as Germany are much more reliant on the pipeline, meaning its closure is causing prices to spike on international energy markets.
The move has raised fears factories could be forced to adopt a four-day working week to conserve energy. No date has yet been set for when Nord Stream 1 will be reopened.
Bill Farren-Price, head of macro oil and gas research and energy consultants Enverus, told BBC Radio 4’s Today programme of the decision: ‘It’s definitely going to bump prices higher after Russia failed to restart that pipeline.
‘But it’s becoming pretty clear to anyone who’s watching these markets that Russia’s weaponization of gas exports and a complete shutdown of supply to Europe is not impossible now.
‘And I think that’s what people are worried about now – the crunch moment is going to come in the winter when, if it’s particularly cold, demand for gas across Europe and even the UK is going to exceed what can be imported, and I think that’s the worry that people have.
‘It’s going to send prices back up to highs that we saw at the end of August or even beyond.’
Meanwhile the FTSE 100 benchmark index of leading companies fell by 64 points or 0.88 per cent to 7,217.43 this morning, and sterling dipped further against the dollar.
Derek Lickorish, chairman of Utilita which supplies 800,000 homes, also told BBC Radio 4’s Today programme: ‘When the banking system failed, Gordon Brown on October 8, 2008 made a £500billion facility available to bail out the banks.
‘And it’s now time that the Government bailed out energy customers – and not just domestic customers, business customers as well.
‘And I believe the sum is going to be, if this is what we’re going to do – and we don’t know, I need to stress that – but if we were to do it, it’s going to cost somewhere around £60 to £100billion to freeze prices for all customers for about 12 months.
‘But of course we don’t know what’s going to happen to the price increase from January 1 and gas is going to peak today. That means that prices start getting baked in not only to January cap, but also to the April one as well – and that could well have a ‘6’ in front of it.’
Mr Kwarteng used an article in the Financial Times to stress that the next Government will behave in a ‘fiscally responsible’ way.
Mr Kwarteng, the current Business Secretary, said that there would be ‘some fiscal loosening’ in a Truss administration to help households through the winter, stressing that it was the ‘right thing’ to do.
He said that the UK does not need ‘excessive fiscal tightening’, pointing to the UK’s ratio of debt to GDP compared to other major economies.
‘The OECD has said that the current government policy is contractionary, which will only send us into a negative spiral when the aim should be to do the opposite. But I want to provide reassurance that this will be done in a fiscally responsible way. Liz is committed to a lean state and, as the immediate shock subsides, we will work to reduce the debt-to-GDP ratio over time,’ he wrote.
Mr Kwarteng, a close political and ideological ally of Ms Truss, offered a vision for how he would operate the Treasury as he said that the next Government would be ‘decisive and do things differently’.
‘That means focusing on how we unlock investment and growth, rather than how we tax and spend. It is about growing the size of the UK economy, not burying our heads in a redistributive fight over what is left,’ he wrote.
His comments directly echo those of Ms Truss on Sunday, as she insisted that her plan to reverse the rise in national insurance is ‘fair’ despite it directly benefitting higher earners.
She told the BBC ‘growing the economy benefits everybody’ and it is ‘wrong’ to look at everything through the ‘lens of redistribution’.
Labour seized on the indication to accuse the Tories of stealing their ideas.
Frontbencher Nick Thomas-Symonds told the BBC’s Westminster Hour that it was once again another example of his party ‘making the political weather’.
The new Conservative leader will be announced just after midday in central London.
Both candidates have spent more than a month traversing the country taking part in hustings in a bid to win over the 200,000 party members.
The winner will be installed tomorrow, becoming the third Conservative prime minister since 2016, when David Cameron quit after losing the Brexit vote.
Chancellor-in-waiting Kwasi Kwarteng has already been scrambling to reassure markets that although government borrowing will be ‘looser’ it will remain ‘responsible’
Rishi Sunak (pictured yesterday) is expected to be defeated by Liz Truss in the Tory leader battle
Boris Johnson will remain in Downing Street until the formal handover tomorrow
They face a chilling in-tray, with the standoff with Russia hammering the economy and deep party splits about the legacy of Boris Johnson.
The formal announcement will be made by Sir Graham Brady, chairman of the 1922 Committee of Conservative backbench MPs.
The new leader is expected to make a speech following the announcement, before spending the rest of the day finalising their choices for Cabinet and wider ministerial roles and writing their first prime ministerial speech.
Over the weekend, Mr Johnson urged his party to unite behind the contest’s winner.
‘This is the moment for every Conservative to come together – and back that new leader wholeheartedly,’ he wrote in the Sunday Express.
Once the result of the contest is known, Mr Johnson and his successor will go to Balmoral, rather than Buckingham Palace, for the appointment of the new prime minister on Tuesday, in a break from tradition.
Described by allies as likely to be a ‘very sad’ occasion for the outgoing prime minister, the Queen will receive Mr Johnson on Tuesday at her Aberdeenshire home, where he will formally tender his resignation.
This will be followed by an audience with the new Tory leader, where she or he will be invited to form a government.
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