Liz Truss unveils freeze on energy bills from October
The new Prime Minister has been speaking in parliament
Last updated 8th Sep 2022
New Prime Minister Liz Truss says she will limit energy bills at £2,500 a year for an average household over the next two years.
It's part of a package of measures being set out in Parliament by Ms Truss to ease the cost-of-living crunch.
The Prime Minister said the new 'energy price guarantee' will come into effect on the 1st of October when the new price cap was due to increase energy bills by 80%.
Ms Truss said the new measures will save the typical household £1,000 a year and is in addition to the £400 package announced by Boris Johnson's government.
Government to borrow billions of pounds
The plan will see the Government limit the price suppliers can charge customers for units of gas, replacing the existing price cap set by regulator Ofgem.
Using tens of billions of extra borrowing, the Government will provide energy suppliers with the difference between the new, lower price and what they would charge were this not in place.
The Prime Minister told MPs: "This is the moment to be bold. We are facing a global energy crisis and there are no cost-free options."
Old price cap scrapped
Under the current domestic energy cap, households face average bills of £1,971 but this was set to rise to £3,549 in October - and forecasts have suggested it could hit as high as £7,700 by April 2023.
The £2,500 "energy price guarantee" will apply in England, Scotland and Wales from October 1, with the same level of support made available to Northern Ireland, which has a separate energy market.
The guarantee is based on the existing cap, plus the already promised £400 energy bills discount for all households, meaning costs will be similar to those faced today, the Government says.
What about oil heating bills?
Prime Minister Liz Truss said a fund would be set up for those using heating oil, living in park homes, or on heat networks.
Speaking in the Commons, Ms Truss said: "We are supporting this country through this winter and next and tackling the root causes of high prices so we are never in the same position again."
She went on: "For those using heating oil, living in park homes, or those on heat networks, we will set up a fund so that all UK consumers can benefit from equivalent support."
No new windfall tax
Labour leader Sir Keir Starmer attacked the Government's plan for funding the package announced by Liz Truss which: "does not come cheap".
Responding in the Commons Sir Keir said the refusal to fund it with a windfall tax showed she was "driven by dogma" and "it's working people who will pay for that".
"Ask voters whether they think that it is fair that they pick up the bill, or those companies that make profits they didn't expect to make, and there is only one answer to that question.
"It is a very simply question of whose side are you on?"
More to follow
The cost of living crisis
Interest rates and inflation go up
Inflation rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022. With interest rates also rising to 4%, those saving money will earn more interest on their finances, whilst those paying mortgages would pay more interest to the bank.
Energy bills
The price of energy went up incredibly as the cost of living crisis hit, with the gas price spike caused largely by the war in Ukraine. The price cap - which is set by an independent regulator to help offset costs onto customers - was set to rise to £3,549 for an average home in October but a price freeze from the government restricted the typical bill to £2,500. That's still an increase of 27% from the previous energy cap and as it's a cap on unit cost, the more energy you use the higher your bill will be.
Food prices
The cost of a weekly shop also has gone up as a result of the cost of living crisis. As a result of the war in Ukraine, a number of products including cooking oils and wheat have been disrupted. This means that several products are now considerably more expensive, driving bills up for customers.
Prices at the pumps
The average cost of petrol has also rose to unprecedented levels. Supply lines for petrol have been thrown into doubt as a result of the war in Ukraine, as Russia is a large export partner for gas, oil and fuel. In April 2022, the average price for a litre of petrol on the forecourt was 160.2p, whilst a litre of diesel would cost 170.5p. By late June 2022 the price had risen to an average of 190.9p for a litre of unleaded and 198.9p for a litre of diesel. In March 2023 the price wass on average of 147.03 in petrol and 167.04 in diesel.
Average cost of filling up a car with petrol hits £100
On 9th June 2022, the average cost of filling up a car with petrol hit £100 for the first time ever. Diesel had already hit that milestone. It comes as the cost of fuel hit a record high of one pound eighty a litre. The 2p rise was the biggest daily jump in 17 years. Prices have dropped by at least 20p per litre since the high point.
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