UK’s Liz Truss will unleash billions of pounds to help with energy

LONDON — The U.K.’s new Prime Minister Liz Truss is set to announce a package worth tens of billions of pounds to help people to pay their energy bills on Thursday, but there are concerns over how it will be funded.

The policy announcement is expected to freeze the price of energy either at its current level or at £2,500 ($2,870). As it currently stands the cap coming into effect next month will raise the average energy bill from £1,971 to £3,549 a year.

Truss said she would “deal with the energy crisis caused by Putin’s war” in her maiden speech as prime minister on Tuesday evening. “I will take action this week to deal with energy bills and to secure our future energy supply,” she said.

The announcement is set to come as more than 170,000 people in the U.K. plan to cancel their energy bill payments on Oct. 1 in protest against the increased energy price cap.

The number of people in fuel poverty in Britain, defined as being unable to adequately heat a home, will hit 12 million households (42%) this winter if financial support isn’t put in place, according to the End Fuel Poverty Coalition campaign group.

£180 billion worth of support?

The exact details of the package have yet to be revealed. Initial projections suggested it may be around £100 billion worth of support, but the latest estimates from Deutsche Bank said it could be closer to £200 billion.

The Bank hiked up its expectations as reports suggested an energy bill freeze would sit at around the £2,500 level, which was “a substantially lower amount” than the bank had anticipated, it said in a research note Wednesday.

Reports also suggest a £40 billion package will be put in place to support businesses with their energy costs, according to the bank, bringing the total of the expected support measures to £180 billion.

It was initially anticipated that support would only be available to households.

The figure is almost half as much as was spent on providing financial support during the Covid-19 pandemic and just over 8% of gross domestic product, according to Deutsche Bank. It estimates the freeze will be in place from October.

‘Bill will eventually fall on taxpayers’

The package set to be announced by Truss might not be too dissimilar to a plan proposed by the opposition Labour Party on Aug. 14.

The main difference is that Labour had suggested funding the move through a windfall tax on oil and gas companies — something the new prime minister has ruled out.

“I am against a windfall tax,” Truss told the House of Commons during her first questioning session with fellow lawmakers on Wednesday.

“I believe it is the wrong thing to be putting companies off investing in the United Kingdom just as we need to be growing the economy,” she said.

Growing the U.K. economy through “tax cuts and reform” was one of three…