Closing summary
Time to recap….
Britain is facing tens of billions of pounds of extra borrowing to cover the cost of protecting businesses, public sector organisations such as schools and hospitals, and charities from the full force of the energy crisis.
The UK government announced it will cap wholesale electricity and gas costs for non-domestic users at less than half the market rate expected this winter from the start of October.
The plan, two weeks after outlining protection for households, could avert a winter catastrophe for businesses.
The package will only initially last for six months – with further help potentially to be offered to vulnerable firms and organisations that need more support beyond March.
Under the plan, wholesale prices for electricity are expected to be capped at 21.1p/kWh, while gas would be capped at 7.5p/kWh – for those on existing fixed price contracts.
Those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum amount.
Analysts at Cornwall Insight said the move would effectively reset the market back to last spring’s price levels, before the surge in wholesale energy prices this summer as Russia tightened the screw on Europe. They estimate it will cost £25bn.
Today the UK Government published the details of its Energy Bill Relief Scheme for non-domestic customers – the scheme will provide relief in GB initially from 1 October 2022 to 31 March 2023.
— Cornwall Insight (@CornwallInsight) September 21, 2022
You can find our initial reaction below:https://t.co/bs0DOZzfiB
Chancellor Kwasi Kwarteng said the plan would “stop businesses collapsing, protect jobs and limit inflation,”.
But the announcement, in a press release, meant MPs were not able to quiz ministers about the plan. Costing details could come in Friday’s mini-budget.
Business secretary Jacob Rees-Mogg told broadcasters that the final cost of the scheme would “unquestionably” run into “tens of billions” of pounds, but couldn’t give a precise amount – as it all depends how high electricity and gas prices rise this winter.
Investec estimate the plan could cost up to £48bn.
Business groups broadly welcomed the plan, saying it would help firms keep running through the winter.
But several groups warned that further help will be needed; Make UK, the manufacturers’ trade body, warned prices could “remain high for many months to come”.
Labour warned that the plan came too late for some businesses, saying the delay in providing support was ‘farcical’.
The package has also been criticised for not being better targeted. As Business, Energy and Industrial Strategy Committee Chair Darren Jones put it:
“Capping the price for all businesses is a waste of taxpayers’ money, which should be targeted at those which need it the most.
Why should British taxpayers collectively get into even more debt to hand over public funds to Amazon?”
However, Resolution Foundation points out that companies on long-term contracts, paying less than the government’s new cap, won’t quality for savings – reducing the total cost.
Geoff Barton, general secretary of the Association of School and College Leaders, said a six-month cap made it “impossible for schools and colleges to plan financially with any degree of confidence”.
Hospitality firms, nurseries and breweries all warned that ministers are creating a cliff edge in March 2023, when the cap will end.
Councils in England and Wales said they needed more help to get them though the cost of living crisis.
Here’s the full story:
And a detailed explainer:
In other news…
The UK borrowed almost twice as much as expected in August, at over £11.8bn, as soaring inflation pushed up the cost of index-linked debt.
The pound has hit a new 37-year low against the US dollar, at just $1.1325.
The foreign exchange markets were shaken by Vladimir Putin who has ordered Russia’s first military mobilisation since World War Two, and accused the West of nuclear blackmail.
The government has been warned that cuts to stamp duty will hurt first-time buyers and stoke an inflationary bubble in the property market – following reports that Liz Truss is planning to lower the tax to encourage growth.
Economists have called for a shake-up of the Bank of England’s monetary policy committee….
… which is expected to announce another increase in UK interest rates tomorrow. Could we see the biggest rise since the late 1980s?
The GMB union argued that governor Andrew Bailey should speak out, asking;
“Will you denounce these plans for uncontrolled banker bonuses as a risk to inflation? Our members know that inflation is being driven by energy prices, profiteering and supply chain disruptions, not pay.”
The energy crisis has forced Germany to nationalise its biggest gas importer, Uniper, to avert a crisis as it battles energy shortages resulting from Russia’s war in Ukraine.
UK retailer Marks & Spencer is increasing staff pay for the second time this year and providing 4,500 employees with a £250 shopping voucher as part of a £15m package to help with the rising cost of living.
In a grim development, more than 5 million Britons have gone without food, according to new research that reveals people are skipping meals “just to keep the lights on”.
Nearly 11 million people are now behind on their bills, the Money Advice Trust reported.
Online gambling firm Betway has been fined more than £400,000 after its marketing material was found on the children’s section of the West Ham United website, including a page where young fans were invited to colour in a teddy bear.
And French telecoms billionaire Xavier Niel has acquired a 2.5% stake in Vodafone…which could herald a shake-up at the mobile giant.
Over in New York, Liz Truss has told executives at a business roundtable in New York that boosting the City of London will help to level up the UK.
Truss argued that promoting the financial sector (where the government controversially wants to lift the cap on bonuses) will actually help the rest of the country.
She said:
We want the City to be the most competitive place for financial services in the world, and we see that as a key part of the levelling up agenda, because when we unblock capital, that capital will be used across the UK to make every industry become more productive and competitive.
Andy Sparrow’s Politics Live blog has all the details:
