LONDON — Britain’s new prime minister, Liz Truss, is scrambling to save millions of households from soaring energy bills this winter, costing tens of billions of pounds to cut gas and electricity bills for two years. It announced Thursday a drastic plan to freeze. to the UK Treasury.
The plan, which Mr Truss rolled out on his third day in office, could be the biggest government intervention in the economy in decades, costing states £78 billion (about $90 billion) to fight the coronavirus pandemic. It could be even bigger than the emergency measures during the pandemic. , to keep people on the job.
The move is aimed at protecting people from a sharp rise in energy costs next month, when the annual price of electricity and natural gas for a typical UK home was set to jump from £1,971 to £3,549. This plan limits average annual costs to £2,500. Business, charity and school expenses will also be capped for six months, highlighting the program’s extraordinary scope.
Truss said the government would lift a ban on hydraulic fracking and give approval for new oil and gas drilling in the North Sea. This is part of a long-term effort to reduce the UK’s reliance on imported energy. However, the new supply is not fast enough to avert the current crisis, largely due to Russia’s retaliatory cuts in gas supplies to Europe.
“Now is the time to be bold,” Mr. Truss told a raucous congressman. “We are facing a global energy crisis and there are no inexpensive options.”
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She said the measure would save a typical household £1,000 a year, including a £400 reduction in bills announced by the last government in May. “We are helping the country this winter and next,” she said.
For Truss, who campaigned with a message of tax cuts and deregulation, it was a striking ideological reversal and a litmus test for her fledgling government. Whether her new plan calms the nerves of those worried about being able to heat and light her home this winter could decide her fate as prime minister. I have.
It could also help determine how well the West can weather Russia’s efforts to use energy as a weapon against European nations that imposed sanctions on Moscow after it invaded Ukraine. Yes. The UK is less dependent on Russian energy than Germany or Italy, but the structure of its energy markets makes it highly sensitive to fluctuations in natural gas prices.
In her remarks, Truss did not put a price tag on the policy. Officials said the cost would depend on several variables, including the market price of gas. But the UK plan would require huge borrowings, which could affect the government’s credit rating and currency strength.
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But capping energy prices should take some steam off inflation, which economists had predicted could peak anywhere between 13% and 22% by early next year. Consumer prices in July were up more than 10% from a year ago, the fastest pace in 40 years. Truss estimates that price caps could keep inflation down by up to 5%.
Truss said he would go ahead with his campaign promises, arguing that tax cuts would help boost the overall economy. But some critics said such a move would only exacerbate the damage to Britain’s finances and could exacerbate inflation by further stimulating demand in the economy. argues that the government can recoup some of the lost revenue by accelerating economic growth.
Stephen Castle contributed to the report.