Liz Truss puts finishing touches to £100bn energy package

Britain’s incoming prime minister Liz Truss will on Tuesday finalise a £100bn package to address the UK’s energy crisis by capping the cost of gas to bring down bills for households and businesses.

Under the plans being worked on by the Treasury, the UK government would subsidise the wholesale cost of gas allowing suppliers to cap the price of energy to households and businesses, leaving taxpayers exposed to any further surges in energy markets.

The measures are one of the top priorities for Truss, who is due to become prime minister later on Tuesday after beating her rival Rishi Sunak for the Conservative leadership.

Truss’s team said the package would provide protection from the biggest energy shock for decades, preventing mass corporate casualties and keeping millions of households out of fuel poverty. It is not clear whether the caps for households and businesses will be set at the same level.

One senior official confirmed that Truss’s team was drawing up the plans ahead of a potential announcement on Thursday: “There will be a cap, freeze or guarantee on the wholesale gas market,” he said.

Truss, 47, will be formally appointed by the Queen at her Balmoral estate in Scotland. She will address the nation as PM for the first time in a speech from Downing Street at about 4pm, after which she will begin to name her cabinet.

The rescue package will be a huge challenge for Britain’s straitened public finances, since Truss has also promised tens of billions of pounds of tax cuts. It would be paid back either through consumer bills or taxation over the long term.

The relief package was discussed on Monday night by energy executives and Jacob Rees-Mogg, earmarked to be the next business secretary.

Capping gas prices would lower wholesale electricity rates. About 40 per cent of Britain’s electricity is generated by gas-fired power plants, which tend to set wholesale rates for the rest of the market, even though other technologies such as wind produce power more cheaply.

In the long term Truss’s new government wants to decouple electricity prices from gas entirely, a policy the EU is also pursuing.

Brussels is also recommending that EU member states take emergency measures to cap wholesale gas prices.

Ahead of the transition of power, outgoing prime minister Boris Johnson gave a defiant speech outside Downing Street, reeling off a list of his administration’s achievements. But he promised to give his wholehearted support to the new Truss administration.

“I’m like one of those booster rockets that has fulfilled its function and I will be gently re-entering the atmosphere and splashing down invisibly in some remote, obscure corner of the Pacific,” he said.

“Like Cincinnatus I am returning to my plough and will be offering this government nothing but the most fervent support.”

Some historians believe that Cincinnatus — despite his famous plough quote — later made a comeback as ruler, a fact that classics graduate Johnson will have been aware of.

Johnson did not dwell on the host of complex dilemmas facing his successor, which range from soaring inflation and an expected recession to a wave of strikes.

Liz Truss will become the UK’s prime minister. What can we expect from her? @gideonrachman, @greenmiranda @stephenkb and @mfilippino will answer your questions in our Twitter Space today at 2pm BST.

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— Financial Times (@FinancialTimes) September 6, 2022

Instead, he chose to focus on positive points, saying that private sector investment was “flooding in” and unemployment was at its lowest level for half a century. “We got this economy moving again, despite the opposition and the naysayers.”

He declared he had left the economy strong enough to enable the new administration to give people “the cash they need” to get through the energy crisis.

“If Putin thinks he can succeed by bullying or blackmailing the British people he is utterly deluded.”

He said his government had “got Brexit done”, carried out the fastest Covid vaccine rollout in Europe, started work on high-speed rail lines and delivered early supplies of weapons to the Ukrainian government soon after Russia’s invasion.

“That may have changed the course of the biggest European war for decades,” he said.

Johnson could not resist a final dig at the Tory MPs who had brought him down in July despite him winning a vote of confidence early in the year.

“The baton will be handed over in what has unexpectedly turned out to be a relay race . . . they changed the rules halfway through, but never mind that now.”