In a remarkable move, Britain’s new prime minister Liz Truss today offered a $150 billion lifeline to the country’s energy problem and pledged to keep average home energy costs at or below £2,500 for the next two years.
Without assistance, the typical home energy bill would have increased by 80% on October 1 from its current level of £1,971 to £3,549 annually under Ofgem’s most recent price ceiling, before skyrocketing to unaffordable levels in 2023.
The two-year arrangement will shield billpayers from additional price increases over the next months and save the typical household an estimated £1,000 starting in October.
Under a six-month assistance programme made available by the Government, businesses, hospitals, and schools—which are not covered by Ofgem’s domestic price cap—will get an equal infusion of emergency help.
Following that, the most vulnerable sectors will continue to get support, and a review will be conducted in three months to determine where the assistance should be focused.
The government estimates that the “energy price guarantee,” which will be put into effect through newly created central contracts with suppliers, would save families £1,150 on average over the course of the following year.
Today’s prime minister urged members of parliament gathering in the Commons to take risks. There are no cost-free solutions to the world’s energy issue.
Whether you’re a young family or a retiree, MailOnline has compiled all the information to determine what Thursday’s turn of events imply for your household, as well as for small companies, care facilities, and hospitals:
HOSPITALITY: If further help is not swift and audacious, businesses will shut.
Hospitality establishments all across the nation, which had been devastated for two years by Covid, were overjoyed to learn that further assistance would be coming their way as they, along with thousands of other companies, will soon be confronted with sky-high energy costs.
Kate Nicholls, CEO of UKHospitality, issued a warning today stating that hundreds of companies may fail in the next months without further government assistance.
She continued, saying, “We warmly appreciate the Prime Minister’s awareness of the particular challenges the hotel sector confronts and the pledge of more assistance, together with her good strategy to assist consumers and businesses in addressing increasing energy expenses.
“We look forward to engaging with the incoming Government on creating measures that will promote a long-term recovery for our industry, but to give both large and small enterprises a chance to survive until spring, we will need help this fall and winter,” the statement reads.
“Measures need to give an immediate infusion of funds, such as lowering the sector’s VAT to 10% and offering company rate relief.”
“While the much-needed energy price freeze will relieve pressure on our clients and associates, high bills will continue to restrain expenditure in the industry, and operators themselves will still be responsible for covering energy prices and other mounting expenses.
“If further help is not provided swiftly and boldly, this will be too much for many hospitality enterprises, and hundreds of community assets will be closed and jobs lost.”
The estimated annual energy expense for James Allcock, 36, proprietor of The Pig & Whistle in Beverley, East Riding of Yorkshire, has increased from $2,928 to almost $22,500.
He responded to Ms. Truss’ statement by saying, “It is totally off the mark; the length of it is disrespectful.”
“I believe it is simply disrespectful because families receive two years and we get six months,” the speaker said. I am more than dissatisfied since it is insufficient.
“Not only is the ceiling insufficient, but also the length of time it applies to enterprises and the fact that it lacks VAT support.
Granted, this is a different government, but the Conservative Party remains the same.
She has been on the front bench of government and has access to the information, so to suggest that she has just had a day to accomplish this is disrespectful to the intellect of the public.
In another place, Sacha Lord, Greater Manchester’s nighttime economy adviser, expressed his worries that many owners of hospitality businesses “stay in limbo” as a result of a lack of certainty in the years to come.
He declared: “The planned six month initiative is a welcome intervention to assist companies through this energy crisis, but it is still unclear what the Government’s long term strategy of support is.
“The UK economy is supported by optimism, but I am worried that the bulk of company owners remain in a limbo with no guidance or advise on how to proceed given that there is no finalised plan in place for firms beyond March 2023.
In addition to seriously hurting investment opportunities in UK industry, I think many enterprises will still be forced to shut. I am unable to see how this programme will prevent the anticipated layoffs in the hospitality industry given its lack of assurance and detail.
“I hope today’s announcement is a preview of more to come, as it is vital the Government also disclose its plans for more financial help and tax reductions to meet the persistent inflationary pressures on business,” said the speaker. “Alongside a long-term strategy for energy support.”
A café owner expressed his displeasure with Liz Truss’ assistance for the hospitality industry, saying he had anticipated a reduction in VAT rates to help companies survive.
SCHOOLS AND EDUCATION: An immediate action is required.
Schools, colleges, universities, and other educational institutions will all be covered by Ms. Truss’s new six-month assistance programme even though they are not covered by the Ofgem price ceiling.
A number of headteachers have recently issued warnings about unaffordable increases in the cost of powering and heating their facilities, especially during the next winter months, and are modifying their budgets to account for these quickly growing costs.
Without the intervention, leaders and academy heads were expected to deal with eye-watering energy bill increases of more than 300 percent by reducing the number of teachers, increasing class sizes, and eliminating field excursions.
However, the Prime Minister’s decision on Thursday will provide educators with some immediate comfort as they will get an emergency assistance boost as part of a six-month support programme provided by the Government.
Despite cautioning that they required concrete assurances for once those six months were out, industry experts today hailed Ms. Truss’s lifeline.
We are happy that the government is expanding the energy price guarantee to schools and colleges, said Geoff Barton, general secretary of the Association of School and College Leaders. They are under extreme and unsupportable financial strain as a consequence of rising energy prices, making this action imperative.
“However, we are worried that the Prime Minister’s declaration seems to imply that this assurance would only endure for six months, and we will be seeking clarity about what happens beyond that as well as further information about precisely how the guarantee will operate.
There is “simply no way that schools and colleges can ever sustain unchecked growth in energy costs without this having an effect on instructional offering.”
We are also happy that families are protected, as we believe this will lessen the possibility of a rise in the UK’s already very high rate of child poverty. Children who are cold and hungry are not in a state to learn, from an educational standpoint.
We must, however, comprehend how far the guarantee will go to safeguard the most defenceless families.
The new plan might reduce the amount of money schools must spend on energy bills, but according to NAHT’s general secretary, Paul Whiteman, it might not be enough to change the current circumstances.
He declared: “A financing problem in schools has already been exacerbated by spiralling energy expenses. The statement made today is undoubtedly an improvement over taking no action at all, but it does not end the situation.
“Many schools will still find themselves with exceptionally expensive expenses this fall and winter, even with this limit.” This could help prevent things from becoming worse, but it won’t definitely make them better.
“We won’t know for sure how beneficial a move this will be until schools have been able to study in depth at how this impacts them individually,” said one expert.
We expect that schools will continue to be one of the front-line services that are preserved in the future despite the time-limited character of the cap.
Energy costs are only one of the many financial strains colleges are experiencing this semester. The government’s decision to withhold funding for teachers’ salaries this year has had a significant negative impact on school budgets, and inflation is also driving up many other costs. When it comes to the present financing problem, we are obviously a very long way from being out of the woods.
CARE HOMES: “With all the other expenses we have going, it’s still going to be a problem.”
Leaders in the care home industry have praised Liz Truss’ ideas, but they believe the beleaguered industry still needs more specialised assistance.
The Prime Minister said on Thursday that businesses would get a “similar assistance package” for six months, followed by further help geared at “sensitive sectors.”
MailOnline reported last week that care home operators are being compelled to make extreme changes to absorb rising living expenses. Examples of these changes include limiting meal selections, using washing machines less often, and lowering the amount of entertainment provided to senior residents.
Despite this, several people expressed concern that they won’t make it through the winter without immediate government action.
Care homes are “one of the vulnerable industries,” according to Mike Padgham, head of the Independent Care Group, who expressed his appreciation for the move.
I’d like to think that review would happen sooner for us, he added, because even with our current staffing levels, it might not be enough to stop business failures.
It will continue to be difficult because despite all the other expenses we are facing, business failures will still occur.
The action was hailed as “good and welcome” by Donald Macaskill, CEO of Scottish Care.
“This intervention pushes which pulls us back from such exorbitant sums and is quite welcome,” he added. “We, on a daily basis, get news that providers are being requested for 1,000% hikes to keep the lights and heating on.”
The devil, though, will be in the details.
“The care home and homecare sector is one of the most vulnerable sectors,” Mr. Macaskill continued.
We will keep arguing vehemently that the care sector needs emergency priority in order to make sure that those who use social care services, who are among our most vulnerable citizens, will have enough support during the upcoming years of energy uncertainty.
HOUSEHOLDS: “In my opinion, Liz Truss is approaching it incorrectly.”
Until October 2024, household energy costs will remain at £2,500 annually, which is less than half the amount that many people had feared they would reach.
The 50-year-old disabled Grimsby resident Alan Hanley lives alone. He has received support from the nonprofit organisation National Energy Action, which today issued a warning that many households in extreme fuel poverty require more than just assurances about future prices.
I’m on a pre-payment metre and have been saving the energy in case of a harsh winter, he said, according to MailOnline. The £2,500 cap doesn’t really apply to me because I’ve probably spent around £500.
I would have preferred to see the standing charge on energy metres eliminated because doing so would save £300 annually, money that could have been spent on food and other necessities.
“I’m registered as blind, so the situation is acute. I rely on my specialised computer, which I can only use for short periods of time, and items like my Amazon devices.
‘Personally, I believe Liz Truss is going at it the wrong way and this should have been done with a windfall tax.
‘My main issue is these firms profiteering from the pot – at the moment it’s like they have a permission to manufacture money.’
When done properly, this will be a lifeline, preserving employment and communities, say small businesses.
Martin McTague, National Chair of the Federation of Small Businesses, lauded Ms. Truss’s idea as a “lifeline” for British business owners.
For millions of small companies, receiving confirmation that they will participate in the government’s energy assistance initiatives is a big relief. It is encouraging that assistance is coming since many have been driven to the verge by catastrophic energy costs, he told MailOnline.
For many, the poisonous concoction of unchecked energy price increases, high taxes, inflation, and slow development has become an existential danger.
We now have a high-level commitment in principle to support enterprises in making it through the winter unharmed. Reducing the size of energy costs for small businesses is unprecedented. If done correctly, this will act as a lifeline, preserving employment, communities, and potential economic growth.
The assistance for all except the “vulnerable” selected industries, sectors, or kinds of company cannot be withheld beyond six months, Mr. McTague said.
At the three-month review, it will be important to carefully examine the definition of who qualifies for and is not eligible for that assistance.
“Like the majority of homes, practically every industry that utilises energy in any significant manner is damaged by high bills, according to our research on the sensitivity of small enterprises to energy prices.
Future definitions of “sensitive industries” must be inclusive, practical, and equitable.
However, it has arrived too late for some.
After 22 years, the Ainsty Farmshop, located close to York, will have to shut on September 17 as a result of rising energy costs.
Owner Lily Beaton, 52, told MailOnline that she was forced to shut the business. As of the previous quotation, the annual costs had increased to £20,000, £21,000, and £76,000. Every week, it costs an additional £1,000.
It was no longer a decision; we simply had to put an end to it.
We have all been waiting impatiently for the new PM to take office. We are down but not out; it is too late for us.
Others may find the news to be a lifeline. Stronger Bones’ online supplement company’s managing director, Lawrie Jones, 41, said: “We’ve been particularly concerned about the effect that the electricity bill increases would have on our business.”
We have two offices, and as a tiny firm, we would have had trouble paying these enormous expenditures.
“The statement today provides us with some confidence over the amount of our energy costs, allowing us to continue operating.
As we approach what is often our busiest time of the year, the assistance will allow us to invest in new merchandise.
‘During the cost-of-living crisis, every firm must make difficult choices, but this is one less item we need to worry about.
“Given the state of the economy, it might help boost consumer confidence.”
Knowing that energy costs are set will hopefully help to lessen some of the concerns about a recession and get people spending, which will benefit companies of all kinds.
Others, though, are gravely concerned that small firms may continue to close when the six-month programme is up.
Managing Senior Stairlift The renovations were praised by Kieran Harris, 30, but he added: “I believe it’s simply sellotape over a crack.” Isn’t it just delaying the inevitable? It’s going to result in closures, in my opinion.
“My cousin recently finished buying a fish and chip store, and he’s completely baffled about what he’s going to do.”
It won’t be financially feasible to keep the doors open. Everything else nearby has increased in price. His main expense will be energy, and his rent will be less expensive than his energy costs.
According to Mr. Harris, whose business provides stairlifts to the elderly and crippled, some of its clients’ homes had constant heating prior to the epidemic.
Before winter even arrives, we’re already seeing tiny elderly ladies sitting in their chairs wearing three or four sweaters.
The British Chambers of Commerce (BCC) Director General, Shevaun Haviland, however, praised the initiative today.
“The BCC appreciates this rapid and helpful action from Government,” he said. It is evident the new Prime Minister has listened to enterprises and is offering a robust package of assistance for business, similar to the important help to consumers.
We appreciate that the offer is extended to all non-domestic energy users, including businesses, nonprofits, and government agencies.
The BCC has previously advocated for the price limit. Businesses will benefit from having some financial assurance about the coming six months. A review at three months is essential to provide time to prepare for the conclusion of the six-month term.
“However, it is doubtful that we will see additional investment from industry in the medium term given the other difficulties presently confronting company, like labour shortages, supply chain disruption, and increasing raw material prices.”
“A clear long-term strategy that provides business the confidence to thrive is required if we are to properly revitalise our economy for the challenging months ahead.”