Liz Truss, the frontrunner to become Britain’s next prime minister, has signalled she will intervene to help companies and households deal with soaring energy bills this winter, pledging assistance “across the board”.
Her pledge comes as Ofgem, the energy regulator, prepares to announce a sharp increase in the energy price cap, which dictates bills for the vast majority of Britain’s household from £1,971 to about £3,600 on Friday.
Analysts are forecasting a further rise in January to more than £4,200 and another jump next April, posing a grave threat to household finances.
The intervention by Truss, the foreign secretary, in the Sun on Sunday newspaper is the latest shift in her position from early August when she told the Financial Times that she did not believe in “giving out handouts”.
Kwasi Kwarteng, the business secretary — who is expected to be chancellor in a Truss-led government — also signalled over the weekend that further “help is coming” to deal with the energy crisis.
A spokesperson for Rishi Sunak, Truss’ rival to be the next Conservative leader and prime minister, said that the former chancellor, would “look at all options” to help companies deal with energy bills if he became prime minister — with small businesses likely to be the focus of support.
Sunak’s team questioned how Truss would simultaneously provide help to tackle the energy crisis while providing £50bn of unfunded tax cuts. “To do so would mean increasing borrowing to historic and dangerous levels, putting the public finances in serious jeopardy,” the spokesperson said.
Chancellor Nadhim Zahawi has asked officials to explore ways to provide state help to companies facing a potentially terminal rise in energy bills. The Treasury will present a suite of options to the new prime minister when he or she enters Downing Street on September 5.
One idea being examined by officials is the retooling of Covid-19 loan schemes to help companies survive the looming increase in energy prices. Others include grants to small companies, business rate holidays and temporary exemptions from VAT.
“It’s all speculative, but Nadhim Zahawi has asked for all options on the table,” said one official. “He’s yet to receive any substantial advice on it, but he is of the view that it is something worth exploring.”
Craig Beaumont, head of external affairs at the Federation of Small Businesses, expressed relief that the Treasury was examining a support package for companies as “it has been all about households so far”.
He said using existing mechanisms was the right approach to get help to businesses straightaway. The price cap only applies to domestic bills and the FSB would like a similar arrangement for companies with 10 employees or fewer.
Sir Keir Starmer, the Labour party leader, has increased the pressure on the Conservatives by announcing he would freeze domestic energy bills for six months from October at the cost of about £60bn if in power.
The government of outgoing prime minister Boris Johnson announced a £15bn support package in May to help households with rising bills, including a £400 universal payment. But with energy prices continuing to rise there is growing pressure on Johnson’s successor to go much further — and expand both the size of the rescue package and its scope.
Truss has already announced plans to scrap a planned rise in corporation tax and National Insurance, and remove green levies from energy bills.
She has promised an emergency Budget if she wins that would explore ways of “making sure life is affordable for people,” adding that companies could expect help with bills. “I’m very, very aware that it’s not just customers, or consumers, that are facing energy price problems, it’s small businesses.”
A survey by the FSB found that one in seven small businesses were anticipating downsizing or closing over the next year because of spiralling inflation, driven by energy prices.
Energy consultancy Cornwall Insight has warned that some companies face a fivefold increase in their energy bills in October when a sizeable proportion of corporate fixed-price deals traditionally expire.