UK energy price freeze an option for incoming prime minister

LONDON: Britain’s incoming prime minister Liz Truss is considering a freeze on household energy bills to try to avert a winter costofliving crisis for millions of households, a source said.

Truss’ elevation to Conservative Party leader and prime minister was confirmed yesterday.

Public borrowing would be used to fund the gap between current prices and an 80% rise in the amount suppliers can charge customers from October under the plan prepared by government officials, the source said.

The cost of the move, which will last until at least January, could eclipse the £70 billion ($NZ132.5 billion) bill for the Covid19 furlough scheme, but the Government had decided it needed to act, the source familiar with the situation said.

The cost is likely to be recovered by a levy on bills payable over 10 to 15 years, said the source, who declined to be named because the plans are still under consideration.

Energy suppliers and the opposition Labour Party have called for a freeze on gas and electricity bills.

The average household bill is due to jump to £3549 ($NZ6800) a year next month, and further major hikes are forecast next year.

Truss, who moves from her role as foreign secretary, yesterday beat former finance minister Rishi Sunak in the race to succeed Boris Johnson. She will be formally appointed as Britain’s prime minister today.

‘‘I will deliver on the energy crisis, dealing with people’s energy bills, but also dealing with the longterm issues we have on energy supply,’’ she said.

Investment bank Morgan Stanley said it was difficult to calibrate the cost of a complete freeze given gas market volatility.

‘‘A £70 billion£100 billion cost is a reasonable assumption, with reduced interest payments due to lower headline inflation providing some counter,’’ it said.

Truss had earlier in the campaign said she favoured tax cuts over providing direct support to households facing unprecedented energy bill rises.

Commercial banks were not involved in the household scheme, but could be involved in a separate plan to support businesses, the first source said.

The household relief plan is likely to be announced this week to allow time to put it into action before October.

A Government spokesman said officials were preparing to introduce any new measures as quickly as possible, and they would add to the £400 discount on energy bills that had already been announced.

Europe’s energy price crisis worsened after Russia’s Gazprom said flows through its major Nord Stream pipeline to Germany would remain shut indefinitely.

Although Britain receives only about 4% of its gas from Russia, the squeeze means less could be available from other suppliers such as Norway.