London: British Prime Minister Liz Truss said on Thursday that her government will cap domestic energy prices for homes and businesses to ease a cost-of-living crisis that has left people and businesses across the UK facing a bleak winter.
She also said she will approve more North Sea oil drilling and lift a ban on fracking in a bid to increase the UK’s domestic energy supply.
“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,” Truss told lawmakers in the House of Commons.
Truss said the two-year “energy price guarantee” means average household bills will be no more than 2,500 pounds ($2,872) a year for heating and electricity.
Bills had been due to rise to 3,500 pounds ($4,000) a year from October, triple the cost a year ago. Bills are skyrocketing because of Russia’s attack on Ukraine and the economic aftershocks of COVID-19 and Brexit.
Business and public institutions like hospitals and schools will also get support, but for six months rather than two years.
The government says the cap will cut the UK’s soaring inflation rate by four to five percentage points. Inflation hit 10.1 per cent in July and has been forecast to rise to 13 per cent before the end of the year.
The moves are a huge government intervention in the economy by a leader who sees herself as a small-state, free-market conservative. Truss says she favors tax cuts over handouts, but she has been forced to act by the scale of the crisis.
The government hasn’t said how much the price cap will cost, but estimates have put it at over 100 billion pounds ($116 billion). Truss has rejected opposition calls to impose a windfall tax on oil companies’ profits. The cap will be paid for out of Treasury funds and by borrowing.
The opposition Labour Party says that means British taxpayers will have to foot the bill.
Labour leader Keir Starmer said “the bill will be picked up by working people” rather than oil companies that are forecast to make 170 billion pounds ($195 billion) in windfall profits over next two years because of soaring prices.
The announcement, on Truss’s second full day in office, comes after a summer in which the government refused to say how it would respond. Former Prime Minister Boris Johnson was not able to make major decisions after announcing in July that he would resign. Truss, who won the Conservative Party contest to replace Johnson as leader, declined to announce her plans before she was in office.
The attack on Ukraine has caused an energy crisis across Europe. Russia has choked off the supplies of cheap natural gas that the continent depended on for years to run factories, generate electricity and heat homes.
Britain imports most of its natural gas -- though largely from Norway, not Russia -- and so is vulnerable to shifts in global prices.