Expert comment: Liz Truss's energy plan

Categories: Salford Business School

New Prime Minister Liz Truss today announced plans to tackle the energy crisis. Bills will be capped at £2,400 for the next two years. But what does this mean for the economy? Economic expert Tony Syme gives his view.

Tony said: "It comes eight months since the French government imposed a price cap. Acting so early in the crisis and with the energy giant EDF under state control, the cost to the company is estimated to be £15bn this year. With today’s announcement, the cost to the UK government is estimated to be £130bn-£150bn. That’s quite a difference.

"How this will be paid will be set out in the Chancellor’s fiscal statement later month, but one thing is clear for now. It will be taxpayers who will fund this government borrowing, rather than the energy companies who are making record profits.

"Will it ease the cost-of-living crisis? No. Even with the one-off £400 discount, the typical household bill will rise from the current cap of £1,971 to £2,100 next month, before rising to £2,500 in January. The price cap was £1,277 in March.

"The imposition of a price cap is very welcome, but far too late. Inflation has been allowed to rise unchecked and an autumn of strikes is looming as pay has failed to keep pace. The time for government borrowing had been when interest rates were so low. They are now rising while declining confidence in the UK economy has seen the pound fall to its lowest value since the 1980s. That is the price of previous inaction and we will all now pay the cost."

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