Truss freezes energy bills for 2 years, costs government £150 billion
UK Prime Minister Liz Truss announces an energy bill cap at £2,500 per year for households over a period of two years, costing the Bank of England an approximation of £150 billion pounds.
Newly-elected UK PM Liz Truss unveiled Thursday a substantial stimulus program to assist Britons with rising energy costs and draw investment to the energy industry.
Truss announced a “new energy price guarantee that will give people certainty on energy bills.”
In her first significant action as prime minister, Truss declared that the typical household "will pay no more than £2,500 ($2,880) per year for each of the next two years," giving them "a £1,000 saving per year."
The cap will take effect on October 1st.
For the next six months, firms will receive a similar guarantee. The prime minister announced that vulnerable industries like hospitality will then get further help.
According to CNBC, Finance Minister Kwasi Kwarteng will outline the total cost of the package later this month.
Truss' plan to cap energy bills at £2,500 ($2,880) for two years might cost up to £150 billion ($172 billion).
Truss, in an address to parliament, that "We are supporting this country through this winter and next, and tackling the root causes of high prices so we are never in the same position again," noting that "This is the moment to be bold, we are facing a global energy crisis, and there are no cost-free options."
Truss did not place a price on the deal since wholesale gas prices remain very variable. According to Deutsche Bank, the energy price offset plus tax cuts she has already pledged might cost £179 billion, or in other words, over half the amount Britain spent on the COVID-19 pandemic.
The scope of the proposal, which is being funded by government borrowing, has unsettled financial markets.
Separately, Truss stated that the Treasury would launch a £40 billion ($46,11 billion) joint initiative with the Bank of England to address the significant liquidity needs of energy corporations.
Her decision represented a significant shift from a leader who had ruled out "handouts" during her candidacy to become PM but is now compelled to act to prevent families from slipping into poverty and companies from going bankrupt.
Along with legislative support, Truss announced more than 100 additional exploration licenses for oil and gas in the North Sea, as well as the lifting of a fracking moratorium for towns willing to go along with it.