A typical household will pay no more than £2,500 annually in electricity and gas bills from early October, Chancellor Liz Truss has announced.
In her first major policy announcement as prime minister, Ms Truss said the new price guarantee would last for two years and save the average household in England, Wales and Scotland £1,000. one year for future bills.
The same level of support would be offered to Northern Ireland, where a separate energy market operates.
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“This is a time to be bold. We are facing a global energy crisis and there are no free options,” the Prime Minister told the Commons.
The policy, which Downing Street believes will curb inflation to 5 percentage points and will be enacted through emergency legislation, builds on a £400 payment to households led by former prime minister Rishi Sunak launched earlier this year.
A six-month program for businesses, schools and hospitals will provide comparable support over the winter.
Further targeted support for specific industries such as hospitality will follow, with a three-month review to decide which sectors will benefit.
Read more: Five big unknowns about the Prime Minister’s energy plan
There is currently no cap on energy costs for businesses and specific support figures have not been provided due to differences in how the wholesale energy market works compared to the retail market.
The price guarantee will not affect their energy fixed contracts, but ministers are confident that discounts will be reasonably provided to those customers after negotiations with provider.
Warning that the plan won’t be ‘cheap’
The move, expected to cost tens of billions of dong, will be financed through further government borrowing. Prime Minister Kwasi Kwarteng will set out the projected costs in his financial statements later this month.
Labor argued that the bill freeze should be paid by levying income tax on the profits of oil and gas producers, which the Prime Minister has rejected.
Party leader Sir Keir Starmer said the plan would not be “cheap” and the PM’s tax cut showed she was “dogmatic” and “it is the people who work who will pay for it”.
The Prime Minister said the price guarantee replaces the current price cap, with the government limiting how price providers can charge customers for energy units.
Energy suppliers will be offered the difference between the new lower rate and what they would charge if there was no guarantee.
The price cap, which currently means the average household bill cannot exceed £1,971, is expected to rise in October to more than £3,500 and will continue to rise when the next level is set in January.
Forecasts say it could soar as high as £7,700 next April.
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PM announces household energy limit
Fracking ban lifted as part of move to increase energy supply
The new price guarantee based on the current price cap, combined with a £400 bill discount for all households, means the costs will be similar to those faced by the general public today.
Ms Truss said the cost of extra support would be offset by increasing energy supply and launching an energy task force, as she pledged to make the UK a net energy exporter by 2040. .
We are also accelerating all energy sources in the country, including oil and gas production in the North Sea.
“We’re launching a new round of licensing that we expect will result in over 100 new licenses being awarded.”
As part of a long-term plan to tackle the energy crisis, the Prime Minister also announced that she would end the mining ban.
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‘Did voters choose the measure fair?’
It means that shale gas extraction gets the green light where there is support from the people.
The pledge to net zero remains, although there will be a review to ensure the policy is implemented by 2050 “in a way that benefits business and growth”.
This is part of my vision of rebuilding our economy – a secure energy supply is vital to growth and prosperity, but it been ignored for too long.”
“I will end the UK’s short-term approach to security and energy supply once and for all.”
