Liz Truss, who becomes Britain’s next Prime Minister today, will have at the top of her in-tray the energy bills crisis. Household gas and electricity bills are rising from about £1,300 to £3,500 a year between this winter and the next.
One of her first announcements as PM this week is likely to be support possibly on the scale of the Covid furlough scheme, which cost £70billion. Yet according to an article in The Mirror, she has repeatedly refused to confirm exactly what she will announce, having attacked “handouts” and warned “not all of those decisions will be popular.”
No final decisions have yet been made - and insiders say they will not be until after she is confirmed as Prime Minister, with an announcement at 12.30pm on Tuesday (Sept 6). However, a Truss ally said: ”I’m confident she appreciates the scale of the tsunami. I think it will be akin to what we did during Covid.”
The Mirror's article looked at eight of the leading options for Liz Truss to tackle energy bills - and its rating on how likely each one looked, out of a possible 10.
Cutting National Insurance
Ms Truss has pledged to reverse April’s National Insurance rise, which took the tax from 12 per cent to 13.25 per cent for earnings over £12,570 a year. Yet the richest tenth of people will gain 235 times more than the poorest - £1,802 compared to £7.66 a year, the IFS think tank said, meaning it will do little to help low-wage workers — and nothing for the unwaged at all.
Ms Truss claimed it was “fair” that her tax cut would help the rich so much more than the poor. Taking a Thatcherite stance she said: “To look at everything through the lens of redistribution I believe is wrong”.
Likelihood: 10/10
Scrapping green levies on bills
Ms Truss has vowed to temporarily freeze the green levy, the charge added to energy bills to help investment in renewables. Describing it as a "temporary moratorium", she said it would enable businesses "to thrive while looking at the best way of delivering net zero".
But Paul Johnson, director of the Institute for Fiscal Studies, described the policy as "somewhere between meaningless and pointless”. He said it only saved households £11 over the next three months. Martin Lewis, the Money Saving Expert who has campaigned for government action on energy bills, said it would be a "sticking plaster on a gaping wound".
Likelihood: 10/10
Freezing prices
Allies say Ms Truss is considering a freeze on at least some Brits’ energy bills this winter - but there are few details. One said it was unlikely to be “as crude” as Labour ’s £29bn six-month total freeze on all bills, halting prices for everyone at the current £1,971 and bailing out energy firms to fund the difference.
But Ms Truss has not ruled out an alternative plan drawn up by Scottish Power - where prices would be frozen for two years using loans. The crucial difference is customers would pay back the £100billion cost out of future bills for decades.
Likely Chancellor Kwasi Kwarteng fuelled speculation of this by saying “fiscal loosening” (more borrowing) would be needed. Other options are some kind of targeted freeze to those who need it — or capping wholesale energy prices, with the Government funding the difference.
Likelihood: 8/10
Help for businesses
Hard-pressed small businesses are not covered by the price cap and are suffering unimaginable rises to sums over £20,000 for their energy bills. Any support package would surely need to help them. While not confirmed, an ally of Ms Truss suggested businesses would be helped.
Likelihood: 8/10
Cutting VAT on energy bills
Rishi Sunak, who had criticised temporarily cutting VAT on energy bills, made a U-turn and backed the measure as he came under pressure to outline help. According to the IFS, removing the 5 per cent VAT on household bills would save the average consumer over £150 - way below the huge increase in the energy price cap.
Given Ms Truss is yet to set out specific proposals, it is unclear whether she will back the approach, but cutting taxes has been at the centre of her leadership campaign. There have also been reports she is examining the possibility of reducing overall VAT from 20% to either 15% or 10% to relieve some pressure on households.
Likelihood: 7/10
Cash payments to vulnerable people
Those on Universal Credit are already getting £650 in payments, while pensioners get £300 and disabled people get £150 this winter. It is thought Treasury officials drew up options to extend the payments. These are also the payments Rishi Sunak said he would increase had he won the leadership race.
Liz Truss has not been clear on whether she will adopt this to support people. She has attacked cash “handouts” but also said she would help the vulnerable.
Likelihood: 5/1
Payment or discount to everyone
All electricity bill payers in Britain are set to get a £400 discount off bills between October and March - and 80% of households in England got £150 off council tax in April. But Liz Truss has strongly suggested more of this won’t be the answer for her.
She has said: “What I don’t support is taking money off people in tax and then giving it back to them in handouts. That to me is Gordon Brown economics.”
Likelihood: 1/10
Nationalising the energy firms
Unions and the Green Party have called for energy companies to be brought into public ownership amid spiralling bills and bailouts exceeding £2 billion. According to a recent poll by YouGov, almost half (47 per cent) of those who voted for the Conservatives at the 2019 general election want to see the nationalisation of the energy industry.
Among Labour voters, the figure is even higher, with almost four in five backing nationalisation, but Sir Keir Starmer last month rejected the policy, to the dismay of those on the left. Reversing the privatisation of the energy sector is also perhaps the policy least likely to be embraced by the new PM, who has often championed her values as a free marketeer.
Likelihood: 0/10
For more stories from where you live, visit InYourArea.
Find recommendations for eating out, attractions and events near you here on our sister website 2Chill
Find recommendations for dog owners and more doggy stories on our sister site Teamdogs
