Liz Truss looks at UK energy price freeze to tackle spiralling bills

Liz Truss, who is expected to be named as Britain’s next prime minister on Monday, is considering freezing energy bills in response to the spiralling cost to households.

Energy industry executives have been talking to members of Truss’s camp in recent weeks about ways to freeze energy bills for at least the most vulnerable households.

Truss’s team declined to comment on growing expectations in the energy sector that a freeze is being prepared following the talks. Labour and the Liberal Democrats have already proposed that bills should be capped.

“We are not commenting on speculation,” a spokesperson for the Truss campaign said. “We are not ruling anything in or out.”

The foreign secretary, who is expected to be named Conservative leader at lunchtime, has promised to make a statement in her first week as prime minister on what she intends to do to tackle the energy crisis.

If Truss wins the Tory leadership contest, defeating her rival Rishi Sunak, she would become prime minister on Tuesday, with a statement on the energy crisis expected on Thursday.

Energy companies and think tanks have proposed various solutions to the energy crisis — from a £100bn government-backed loan scheme that would hold prices for all households, to a more tailored approach that would cap the number of subsidised units of energy to target poorer households who tend to use less electricity and gas.

A loan scheme to freeze bills for at least the most vulnerable households is on a menu of potential interventions that officials and business secretary Kwasi Kwarteng, tipped to be the next chancellor, have been working on.

Energy industry executives said the idea of some kind of loan scheme had appeared to be gaining traction with members of Truss’s camp in recent weeks although they felt she had yet to be fully persuaded.

Under the proposals from Labour, average household bills would be capped at £1,971, the level set in April, until the end of March next year. The cost would partly be funded through an increased windfall tax on energy companies.

That would mean that the planned 80 per cent rise in the energy price cap in October — which will take the average household bill to about £3,600 — would not go ahead.

The government would have to provide funding to the energy suppliers to compensate for the loss of income, with the possibility of the money being recouped over many years in higher bills. Suppliers have suggested this could be funded either through government borrowing or commercial loans guaranteed by the state.

Truss did not deny on Sunday suggestions from leadership rival Rishi Sunak’s camp that the cost of her energy interventions — plus plans to reverse rises in corporation tax and national insurance — could top £100bn.

“I understand that this is a huge problem,” she told the BBC. “And I understand people are worried and I want to reassure people that I am absolutely determined to sort out this issue.”

Derek Lickorish, chair of the energy company Utilita, said the industry would back a freeze in prices.

“If we don’t the economy is going to crash and consumers won’t know where to turn to for help,” he told the BBC.

ScottishPower, the Spanish-owned utility that is among Britain’s six biggest energy suppliers, first proposed a loan scheme to hold prices for households in April.

Last month Sir Ed Davey, the Lib Dem leader, and Gordon Brown, the former Labour prime minister, called for the energy price cap to be frozen at its current level and released plans explaining how this could be funded.

Steve Reed, Labour’s justice spokesman, said on Monday: “We have to act quickly. This has to reach far and wide to stop people falling into destitution.”