Liz Truss announcement: New PM unveils plans to tackle cost of living crisis

·3-min read
New British Prime Minister Liz Truss leaves 10 Downing Street, in London, Britain September 8, 2022. REUTERS/Peter Nicholls
Liz Truss leaves 10 Downing Street. The new prime minister has announced her plan to deal with the UK's energy bills crisis.(Reuters/Peter Nicholls)

Liz Truss has unveiled her plan to deal with the UK's energy bills crisis in her first major intervention as prime minister.

The government will freeze energy bills for households for up to two years under a new "energy price guarantee", designed to avoid mass destitution among families unable to meet soaring costs.

Experts have warned of an epidemic of fuel poverty without significant intervention.

Here is a breakdown of the key announcements:

Energy bills

The government will cap the maximum price energy companies can charge for a unit of energy from 1 October, meaning the average household's annual bill will be kept at around £2,500 a year.

Individual households can expect to pay more or less than the typical bill.

The average household will save around £1,000 a year compared to what they would have paid under the new price cap of £3,549 previously announced by Ofgem.

Energy prices will be frozen for two years, Liz Truss has announced (Yahoo News UK/ Flourish)
Energy prices will be frozen for two years, Liz Truss has announced (Yahoo News UK/ Flourish)

The help will apply to households in Great Britain only, with officials working on plans for Northern Ireland.

Households that use heating oil will not be included in this support, but a similar scheme is being worked on for them.

The £400 energy bill discount announced by former chancellor Rishi Sunak in May, as well as the other support for vulnerable households, will still be paid.

Read more: Martin Lewis issues fresh warning to anyone with a fixed-term energy deal

Businesses

The government has also announced support for businesses, which will take a similar approach as the domestic support for households.

It will come in the form of a new, six-month support package for businesses and other non-domestic energy users – including charities and public sector organisations like schools.

There will be a review in three months to consider where the support will be best targeted after the initial six-month period.

Green energy

Green levies will be suspended from energy bills, and the £2,500 price cap freeze takes that into account.

However, the government has said it will continue to fund the schemes the levy supports, like insulation and cutting carbon emissions.

Fracking

Truss confirmed that the moratorium on UK shale gas production will be lifted and will enable developers to seek planning permission where there is local support. The government believes that it could lead to production in as little as six months.

Oil and gas

The government will launch a new oil and gas licensing round as early as next week.

This is expected to lead to dozens of new North Sea oil and gas exploration licences in an effort to boost domestic production.

This will not offer any short-term relief to energy bills as it typically takes between five to 10 years from initial exploration until oil and gas is produced from a field. The last offshore licensing round was in 2020.

Business Secretary Jacob Rees-Mogg leaving 10 Downing Street, London, following the first Cabinet meeting with new Prime Minister Liz Truss. Picture date: Wednesday September 7, 2022.
New business secretary Jacob Rees-Mogg said the government's plans will 'ensure the British people enjoy affordable and plentiful energy in future'. (PA Images)

Long-term announcements

A new energy supply taskforce will be set up, led by the previous head of the UK's vaccine taskforce.

This team has already begun negotiations with international and domestic suppliers in an attempt to agree long-term contracts that could reduce the price paid and increase energy security.

A new energy markets financing scheme will be launched jointly by the Treasury and Bank of England to provide short-term support for energy firms when they require it as a last resort, in a bid to avoid further collapses of energy companies.

How will it be funded?

The scheme will be funded through government borrowing, in a move that will vastly increase the nation's debt. Some reports have said it could cost up to £150bn.

Truss has resisted calls from Labour to fund the plans through a windfall tax on gas and oil producer's excess profits.