Liz Truss freezes energy prices for two years

Unusual times call for unusual measures.

Putin's illegal invasion of Ukraine has set the world price of gas to ridiculous levels: if no action were taken this would impose considerable economic suffering on most people and completely unacceptable suffering to the most vulnerable member of society.

Hence it would be necessary for any government to act, to think outside the box, and to be willing to embrace measures that they would not normally consider. That is the context for the £150 billion package that the Prime Minister has announced today.

This morning Liz Truss set out plans to help with the cost of energy bills and increase our energy security, delivering immediate support for people ahead of this winter.

• Covid and Putin’s war in Ukraine have caused immense challenges for our country, with energy prices rising and families facing significant cost of living pressures.

• That is why we will today announce immediate action to help people with the cost of their bills – giving people certainty to make sure they are able to get through the winter, while also maximising domestic energy production like North Sea oil and Gas, as well as nuclear and renewables to ensure we are never in this situation again. 

• This will ensure people get the support they need and provide certainty for them over the months ahead, whilst securing energy independence for our country in the long term.

Liz Truss has announced that the government will freeze energy prices so as to hold bills at an average of £2,500 a year for the next two years from 1 October, and she has also promise to tackle the root causes of the issues in the UK energy market through plans to increase supply, including the resumption of fracking.

The government will fund the scheme to reduce the unit cost of energy through increased borrowing. The cost is likely to be around £150bn, although Whitehall sources say precise estimates will be given in  a fiscal statement from the chancellor, Kwasi Kwarteng, expected later this month.

The goverment's new Energy Price Guarantee will limit the price suppliers can charge customers for units of gas. The goverment will temporarily suspend and remove green levies worth around £150 a year on average from household bills. The scheme announced today covers England, Scotland and Wales: a similar plan will be announced soon for Northern Ireland.

The PM also announced schemes she said would increase energy resilience, including launching a new round of around 100 new oil and gas licences and lifting the moratorium on fracking for shale gas, as well as accelerating new sources of energy supply including nuclear, wind and solar.

The prime minister said the average household would save £1,000 in total from October because of the price reduction, added on top of the £400 discount previously announced under Boris Johnson.

For businesses and public sector bodies such as schools and charities, a sixth-month scheme will offer what was termed “equivalent support” to that for households, with a review in three months about how it could be better targeted.

The PM also announced a review of the government’s net zero strategy, under the “altered economic landscape”. However, this review appears to be an attempt to adapt climate change targets to the present economic situation rather than indicating that the government is planning to abandon it's COP26 commitments, since the review will be chaired by Chris Skidmore, who chairs the net zero group of Conservative MPs and is a key proponent of meeting the targets.

Liz Truss told the Commons that “decades of short-term thinking” had failed to secure energy supplies, something she said had been exposed by Russia’s invasion of Ukraine.

She also promised that  that households who do not pay directly for mains gas and electricity, such as those living in park homes or on heat networks, would not be worse off and said they would receive personal support through a separate fund.