LONDON (Parliament Politics Magazine) – Allowing energy providers to take out government-backed loans to subsidise bills will help lower consumers’ energy expenditures.
On Thursday, the plan—which had been proposed by the energy sector—is expected to be announced.
The government’s effort to address the high cost of energy for customers is anticipated to revolve around the “deficit reduction scheme.”
Small businesses should also receive some relief because of the plan.
Liz Truss, the next prime minister, promised to “deliver on the energy crisis” in her victory address on Monday, with a price freeze being widely anticipated.
Energy bills are skyrocketing, and the price cap will increase on October 1, which means the typical household in Britain is set to pay £3,549 per year on electricity and gas.
Energy executives have long maintained that the “only game in town” is a superfund backed by the government from which they might borrow to reduce their customers’ costs.
The government would backstop loans to energy providers under such a proposal, which would be used to freeze or at the very least reduce bills this winter and in the future. Over the following 10 to 20 years, these debts would be repaid from bills.
Scottish Power said maintaining the existing price cap of £1,971 for two years would cost close to £100 billion.
Dermot Nolan, the former CEO of Ofgem, the energy regulator, cautioned that this estimate might be “conservative” and questioned how much it would benefit the most vulnerable.
He said on BBC Radio 4’s Today programme: “This kind of price freeze means that a multimillionaire will have exactly the same amount of protection as everyone else.”
At the absolute least, he said, he hoped that the £400 that was currently being given to more disadvantaged individuals was retained, and hopefully extended.
He claimed there were other unanswered concerns regarding what a price freeze would actually entail, such as how long the support would last and whether higher energy bills would eventually result.
Aid to businesses
Businesses are not covered by an energy price cap, unlike homes. This October, a number of fixed-rate business agreements expire, leaving thousands of companies vulnerable to full charges that might increase by four or five times or more. Numerous businesses would fail or reduce payroll costs by laying off employees.
Although the BBC is aware that the specifics of how businesses would be helped may not be worked out in time to be included in Thursday’s energy statement, smaller enterprises are expected to receive assistance comparable to that provided to households.
The head of one business organisation, however, claimed that it was obvious that they had passed a mental Rubicon – they knew that firms needed help to avert long-term damage to the economy.
If businesses were included, it would mean the bill of the government’s energy strategy could likely reach £100 billion.
It is believed that larger businesses may receive customised tax cuts to aid them during the era of high pricing.
It was positive that the government was genuinely contemplating the support it could provide to businesses in such challenging times, said Alex Veitch of the British Chambers of Commerce.
However, it was still unclear whether these measures would go far enough in providing the assistance that many enterprises so sorely needed.
The commitment seemed very promising, and possibly the best reassurance that small businesses needed that some sort of help with bills would follow – not only for households, said Craig Beaumont of the Federation of Small Businesses.
To save thousands of small enterprises that winter, the scale and reach of the assistance would be extremely crucial.
Making sure consumers and businesses are “protected” from the fluctuating energy prices would be a priority for Ms. Truss, who will formally assume her job as prime minister on Tuesday, business minister Greg Hands said to members of the House of Commons on Monday.
