Liz Truss reveals £2,500 energy price cap as winter approaches

Prime Minister Liz Truss revealed her energy relief plan, which capped the average household energy bill at £2,500 per month.

The price cap will come into effect from 1 October 2022, and represents a roughly £1,000 reduction from the previously scheduled 80% price cap rise to £3,548.

The policy will remain in effect until 2024, with businesses set to receive equivalent help for six months, after which alternative assistance will be introduced with a focus on vulnerable industries.

“HM Government is acting to protect British households from the spiralling costs of energy. The Energy Price Guarantee (EPG) which will give people certainty with their bills,” said business secretary Jacob Rees-Mogg in a written ministerial statement.

“The EPG will apply from 1 October and will discount the unit cost for gas and electricity use. This guarantee, which includes the temporary suspension of green levies, means that from the 1st October a typical household will pay no more than £2500 per year for each of the next two years.”

“This will save the typical household £1000 a year. It comes in addition to the £400 Energy Bill Support Scheme.”

The move has been welcomed by some, however analysts pointed out the policy would still leave many of the poorest families without adequate support.

“[One] in five people are borrowing more than they did this time last year, and anyone who has coped with rising prices by going into debt will eventually hit the wall – where their repayments are unaffordable or they exhaust their credit limit. For these people, a freeze at this level isn’t enough to protect them from a looming crisis,” said Hargreaves Lansdown senior personal finance analyst Sarah Coles.

“When pushed on whether there would be additional help for those who need it most, Liz Truss referred back to the lump sum cost-of-living payments coming this autumn and winter. However, these helicopter payments won’t necessarily go as far as the government hopes.”

Meanwhile, Labour leader Keir Starmer called for a windfall tax on energy companies, who are set to rake in £170 billion in profits over the next two years.

“Every pound the government refuses to raise in windfall taxes … is a pound of extra borrowing. It’s that simple,” said Starmer.

Coles pointed out many wondered why energy companies had not been called in to help the fight when they had record profits and plenty of resources to help those who most required assistance.

“The decision not to add more windfall taxes for energy companies is a controversial one. There will be plenty of taxpayers who feel they will be shouldering the burden of paying for this help alone, when the energy companies have broader shoulders.”

“Truss believes that this tax would put companies off investing in the UK – and investing in renewable energy that will provide part of the long-term solution to the problem. If that investment isn’t forthcoming, it remains to be seen whether this belief will still hold sway.”

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