Energy bills for business to be cut in half
ENERGY bills for businesses, schools and charities will be cut in half this winter costing the taxpayer ‘tens of billions of pounds’, the Government said yesterday.
Ministers announced that the price of gas and electricity will be capped from October 1 for six months to ‘provide certainty and peace of mind’ through the winter.
The scheme, which will also benefit hospitals and care homes, is broadly in line with the ‘energy price guarantee’ offered to households earlier this month. This caps average household bills for gas and electricity at £2,500 a year.
Cornwall Insight, a market analyst, estimated the cap will cost the Government £ 25billion, which is likely to be funded by borrowing.
The Business Department suggested a pub fixing its energy costs last month would save around £3,100 a month from the intervention, while a school would save £4,000 a month.
Liz Truss said: ‘I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.’ The scheme would provide ‘certainty and peace of mind’, she added.
Chancellor Kwasi Kwarteng said: ‘We have stepped in to stop businesses collapsing, protect jobs, and limit inflation.’
The scheme will work by capping the price of wholesale electricity at 21.1p per kWh and the price of wholesale gas at 75p per kWh. This is less than half the wholesale prices anticipated this winter. Contracts to supply electricity over the winter currently average 49p per kWh, while those for gas average
£1.70 per kWh. The Government will compensate suppliers for the reduction in prices they are passing on to businesses. It is expected to fund the policy through borrowing, even though the cost of servicing UK government debt hit a record high for August.
The non-domestic price guarantee will be in place for six months, compared with two years for the household price cap, but the Prime Minister has indicated that subsidies could be extended for the hardest-hit businesses.
Vulnerable industries such as hospitality urged Mr Kwarteng to announce further support in tomorrow’s mini-Budget. Stephen Phipson, chief executive of Make UK, which represents manufacturers, said: ‘It does appear likely
‘A lifeline to get through winter’
that prices will remain high for many months to come and industry is likely to need support for a longer period.’
Emma McClarkin, chief executive of the British Beer and Pub Association, said: ‘This is a critical intervention from the Government and it is absolutely needed by the beer and pub sector. This really will provide a lifeline to get through this very difficult winter.’
Geoff Barton, of the Association of School and College Leaders, said: ‘This move was essential as schools and colleges were facing absolutely massive hikes in energy costs, which would have caused an immediate financial meltdown.’
Ministers were unable to say how much the policy will cost because it will depend on how high wholesale prices climb this winter. Business Secretary Jacob Rees-Mogg said: ‘We are talking about tens of billions of pounds, unquestionably. We will have a review in three months to ensure we are giving support in the right places.’
Darren Jones, Labour chairman of the Commons business, energy and industrial strategy committee, said offering cash to all businesses, including large, profitable firms such as Amazon, was a ‘waste of taxpayers’ money’.
WITH its roots in traditional Toryism, this newspaper would normally balk at government bailouts for private firms.
But we applaud Business Secretary Jacob Rees-Mogg for putting together a huge support package to help companies struggling to pay energy bills which have spiralled after Russia’s war in Ukraine.
If radical action had not been taken, many profitable businesses would have gone to the wall, throwing countless workers on to the dole – bumping up the benefits bill and hitting the public finances harder.
By surviving, they can benefit from Miss Truss’s bold tax-cutting agenda – and help turbocharge Britain’s economic recovery.