The dramatic state intervention was accompanied by promises to increase domestic oil and gas production — including fracking for shale gas — and reforms to the energy market.
An “energy price guarantee” will limit average annual household bills to £2,500 over the next two years.
The maximum amount for typical household energy use had previously been due to rise to more than £3,500 in October with some projections showing that bills would have topped £6,000 next year.
A pre-announced £400 energy bill discount will be retained and green levies costing £150 will be temporarily removed, meaning that household bills will remain at roughly their current level of £1,971.
Businesses and public sector bodies like schools would receive “equivalent support” to households — but only for six months. Details of the commercial scheme are less clear.
After the six months, Truss said that ongoing support would focus on “vulnerable industries”; a review would decide which businesses should be targeted. That review is likely to be highly contentious.
“Extraordinary challenges call for extraordinary measures, ensuring that the United Kingdom is never in this situation again,” Truss said.
Government officials declined to say what the gross cost of the intervention would be, but internal estimates have put it at about £150bn, including £90bn for the household element. But that could be much higher, with the taxpayer massively exposed to rising wholesale gas prices.
Downing Street said details of the costings would be set out by chancellor Kwasi Kwarteng at a mini-Budget later this month, arguing a full assessment was needed of the effect on the overall economy.
Truss’s allies insisted the net cost of the package would be “well south” of £150bn, because the reduction in energy bills would knock up to 5 percentage points from inflation, cutting government debt costs.
Lowering inflation by that amount would reduce the immediate debt interest costs by £25bn this financial year, but would not have any lasting effect on debt interest payments.
(Financial Times, September 8, 2022)