Price freeze will save households £1,000 a year

PM pledges to end gas crisis with £200bn giveaway that economists say could avert recession

HOUSEHOLD energy bills are to be cut by £1,000 as part of a sweeping £200bn intervention by Liz Truss as she pledged to end the power crisis “once and for all”.

In an extensive package of support that economists said could help avoid a recession, the Prime Minister said she will freeze average household bills at £2,500 from Oct 1, cancelling next month’s planned rise to £3,549. Businesses will benefit from a separate sixmonth price freeze.

As wholesale prices continue to increase, Ms Truss said the freeze would take between four and five points off inflation, which is currently forecast to reach 13pc by the end of 2022.

Economists said the Government’s financial support made it less likely that the UK would fall into recession this year. Samuel Tombs, at Pantheon Macroeconomics, said the average British household would now spend less on energy over the next six months than during the previous six, which would support consumer spending. Allan Monks, at JP Morgan, expects the economy to shrink for just one quarter, avoiding a full recession.

As well as short-term support, Ms Truss also announced a series of measures to increase the UK’S energy supply in the long term, and a new energy taskforce led by Madelaine Mcternan, who led the Government’s vaccine taskforce.

She overturned the 2019 moratorium on fracking, which was backed by a Conservative manifesto pledge at the last election, with immediate effect and promised to expand the production of oil and gas in the North Sea.

Ms Truss said she had set the UK “a new ambition for our country” to be a net exporter of energy by 2040.

Ministers believe gas could be supplied by fracking within the next six months, and are launching a new oil and gas licensing round as early as next week. It will produce 100 new licences for exploration and extraction.

It is understood that the Government is considering ways to discourage local opposition to fracking projects, such as allowing people living near fracking sites to have subsidised bills.

Chemical and energy giant Ineos, which has been pushing to start fracking, said it was ready to apply for a fracking licence. Tom Crotty, director of the company, said: “We are renewing our offer to the Government to drill a shale gas test well in the UK. We believe we can prove we can do it safely and without harm to the environment.”

A separate Government review, chaired by the Conservative MP Chris Skidmore, will assess whether the pledge to hit net zero carbon emissions by 2050 is being achieved in an economically efficient way. Ms Truss said the Government would give an official costing of the plan in a full Budget in the coming weeks.

The cost of the “Energy Price Guarantee” will ultimately be borne by the taxpayer, because the Government will pay energy suppliers the difference between the normal price and the new frozen price. The energy price cap is currently set at £1,971, up from £1,138 in February 2021.

Ms Truss said: “I’m acting immediately

‘Extraordinary challenges call for extraordinary measures, ensuring the UK is not in this situation again’

so people and businesses are supported over the next two years, with a new Energy Price Guarantee, and tackling the root cause of the issues by boosting domestic energy supply.

“Extraordinary challenges call for extraordinary measures, ensuring that the United Kingdom is never in this situation again.”

The lower cap will be achieved partly through scrapping green levies on energy bills, which cost the average bill payer around £152 a year.

Around 28m households will still receive a £400 support payment this autumn, designed to help them pay higher bills when the cap increased.

The household support package is not available in Northern Ireland, where the energy regulator does not have a price cap, but officials are working to design a similar package to offer households there.

Equivalent support will also be offered to consumers who do not have standard energy tariffs, and there will be a fund available to support households on heat networks.

Under Ms Truss’s plans, businesses will receive the same support for the next six months, after facing energy increases of up to 500pc.

Charities, schools, hospitals and other public buildings will also receive support packages.

Kwasi Kwarteng, the Chancellor, said: “Millions of families and businesses across the country can now breathe a massive sigh of relief, safe in the knowledge that the Government is standing behind them this winter and the next.”