The UK’s newly elected Prime Minister, Liz Truss, is expected to unveil her "bold" and "decisive" plan to tackle the hard-hitting cost of living crisis in Parliament, promising swift action to support households and businesses struggling with soaring energy costs, UK media outlets reported.
Ahead of the announcement in the House of Commons, Truss emphasized in an emailed statement to the media the importance of boosting “long-term energy security and supply”:
“I know families and businesses throughout the country are worried about how they are going to make ends meet this autumn and winter. We will take action immediately to help people and businesses with bills but also take decisive action to tackle the root cause of these problems, so that we are not in this position again. We will set out our plans to deliver on that promise and build a prosperous Britain for everyone."
'Multibillion-Pound' Bailout
Truss's plan to tackle the cost of living reportedly presupposes a price freeze on household bills at about £2,500, rather than the £3,548 per year announced by Ofgem for next month, according to Sky News. On 26 August, the energy regulator revealed the energy price cap would rise 80 percent to £3,549 per year for dual fuel for an average household from 1 October 2022. Some analysts have already speculated that sum could exceed £5,000 next year. The price cap limits how much suppliers can charge for each unit of gas and electricity they supply, as well as the associated standing charge for each fuel. The most recent energy price cap, announced in February 2022, took effect on 1 April 2022 and set the typical energy bill at £1,971 a year.
Furthermore, in line with proposals to be laid out during the Commons debate, household energy bills are expected to slide back to the current level after a £400 grant for every household is taken into account, along with a series of other measures affecting bills.
The costs of the overall support scheme purportedly worth up to £150Bln (approximately $180Bln) over the next 18 months would not be covered by a windfall tax on North Sea oil and gas producers, according to Sky News. The windfall tax is a measure that the opposition Labour Party has long argued for. Instead, the UK Treasury would provide financing directly through government borrowing rather than state-backed loans.
It is also understood that some companies, albeit not necessarily big business, may receive additional help to alleviate the rising energy costs.
Another move reportedly anticipated from Truss is an announcement that the pause on fracking for shale gas will be ended. New drilling could potentially begin within weeks as part of the PM’s hydrocarbon-based push for boosted energy security.
A moratorium on the controversial practice was imposed in 2019 because the practice can trigger earthquakes.
‘Riding Out the Storm’
During her first session of Prime Minister's Questions on Wednesday, Truss was quizzed about her plans to tackle energy costs by Labour Party leader Sir Keir Starmer, who criticized her refusal to tax the profits made by oil and gas firms.
"Is she really telling us that she is going to leave this vast excess of profits on the table and make working people foot the bill for decades to come?" asked Starmer.
In response, Truss stated:
“I believe it is the wrong thing to be putting companies off investing in the United Kingdom, just when we need to be growing the economy.”
She vowed that she would make sure that the energy plan would “support businesses and people with the immediate price crisis, as well as making sure there are long-term supplies available."
During her first address outside Downing Street after being officially appointed by the Queen, Truss pledged that she would ensure that the UK would "ride out the storm" of soaring energy costs.
The West in general - and Europe in particular - have been facing a dramatic surge in energy prices and record-breaking inflation rates. After July’s inflation reading of 10.1 percent in the UK, the Bank of England (BoE) forecast a surge to 13.1 percent later this year. Goldman Sachs went even further, warning that 22 percent inflation could be possible if gas prices remain elevated.
On Wednesday, the pound plunged to its lowest against the dollar since 1985, plagued by fears of a UK recession: Sterling tanked to $1.1406 at about 14:00 GMT.
The present energy crunch has been exacerbated by the decision of officials in Brussels and individual countries to reduce dramatically the purchase of Russian oil, gas, coal, and electricity supplies. The self-inflicted woes were brought on by the sanctions campaign targeting Moscow over its ongoing special military operation in Ukraine. Russian President Vladimir Putin commented on the energy crunch crisis in a speech at the Eastern Economic Forum (EEF) in Vladivostok on 7 September, saying that European leaders had undermined their own economic potential with their short-sighted policies.