PM unveiled cap on wholesale costs at half their predicted seasonal peak to stay in place until the spring

The Prime Minister announced that wholesale costs would be held at half their predicted seasonal peak at a cost predicted to hit tens of billions of pounds amid fears of economic turmoil.

The new Energy Bill Relief Scheme will provide a discount on wholesale costs for all non-domestic customers from October until next March.

Speaking in New York she promised further help after that, mentioning shops and pubs, while Business Secretary Jacob Rees-Mogg suggested schools, and hospitals and care homes, could also be classed as vulnerable to receive ongoing help.

A three-month review will assess what extra help is needed in the spring when gas and electricity prices may have dropped or stayed high.

Emma McClarkin, chief executive of the British Beer and Pub Association, said the energy support ‘will be a lifeline for many pubs and brewers this winter’.

But she added: ‘Whilst this announcement has helped businesses to breathe an initial sigh of relief as they head into this critical period, more support is needed to tackle the cost of doing business and we need a plan beyond the next six months.

‘Our industry is one of only a few that supports jobs and livelihoods in every single part of the UK, and we have the potential to deliver growth in every single community we serve.

‘On Friday, the Chancellor must take steps to address the cost of doing business, by reducing the tax burden on our sector, allowing pubs and brewers the chance to not only survive this winter, but remain at the heart of local economies and their communities for many years to come.’

The Government has set a supported wholesale price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – to cut bills. It will also be backdated for contracts agreed on or after April.

But Mr Rees-Mogg suggested that support will stay in place much longer if energy prices remain high.

Asked if schools facing similar gas prices as today would still get Government support in 12 months, he told Sky News: ‘Schools and hospitals and care homes are obviously going to (need to) be able to afford their energy in a year’s time as well as today.

‘I can’t announce future schemes, it would be wrong to do so, but we need to make sure that we use this time to find out where the support is needed.’

Speaking in New York earlier Ms Truss said the initial scheme ‘will apply from the first of October to make sure businesses have that security through the winter’.

‘We know that businesses are very concerned about the level of their energy bills,’ she added.

‘That’s why we are putting in place a scheme for business that will be equivalent to the scheme for households to make sure that businesses are able to get through the winter.

‘We’re going to review it after six months. We’ll make sure that the most vulnerable businesses like pubs, like shops, continue to be supported after that.’

It is the first of a series of economic interventions expected this week, with Chancellor Kwasi Kwarteng carrying out a mini-Budget on Friday.

The savings will be first seen in October bills, which are typically received in November.

It follows an announcement a fortnight ago from Liz Truss that household bills would be stopped from rising above £2,500 for the next two years.

The household scheme will see families charged a maximum of £2.93 against an expected market price for the next year of £4.32.

It is estimated that the two schemes will mean the State is paying for more than £1 in every £3 of gas consumed. The industry figures, obtained by ITV News, suggest businesses will be charged a guaranteed maximum price of £2.93 per therm, with taxpayers having to make up the difference against the expected market price of £4.67.

Kate Nicholls, chief executive of UKHospitality, said: ‘This intervention is unprecedented and it is extremely welcome that Government has listened to hospitality businesses facing an uncertain winter.

‘We particularly welcome its inclusiveness – from the smallest companies to the largest – all of which combine to provide a huge number of jobs, which are now much more secure.

‘The Government has recognised the vulnerability of hospitality as a sector, and we will continue to work with the Government, to ensure that there is no cliff edge when these measures fall away.’

But Tina McKenzie, from the Federation of Small Businesses (FSB), said: ‘Subsidising the unit costs of electricity and gas for six months is welcome, but there are those who miss out from before the six-month period, and help must not result in a cliff-edge afterwards. We are calling for a hardship fund to be created for those who fall outside of the current support, or for whom the current support will be insufficient.

‘There will be hardship for some businesses which signed fixed contracts after prices rose but before April, who find themselves excluded from the scheme. FSB calls on energy suppliers to allow those customers to switch without charge to new fixed contracts, covered by the Energy Supported Price, if that makes the difference for the small business to survive.’

Yesterday Miss Truss promised longer term support for firms, saying: ‘We will make sure businesses are protected from those very high prices that were being predicted. I can reassure people who own pubs that those are exactly the types of businesses that will get that longer term support.’

It emerged last week that firms had not been given any details or figures about the incoming package, despite many facing steep price rises from next month.

Hospitality industry groups have urged Mr Rees-Mogg to give clarity to both small and large businesses with the announcement, which is his first in his new role. Last week No 10 sought to allay fears over the lack of detail in the announcement, with a spokesman confirming support would be backdated to October 1 if necessary.

He added: ‘We did recognise there is concern about the support but what we are saying is that we will be providing the support to cover their October bills. We’re still working through exactly whether it will need legislation.’

The delay was attributed to the fact that any intervention scheme had to be constructed from scratch.

For customers on fixed-price contracts, if the wholesale element is above the new Government cap, the price per unit will be automatically reduced for the duration of the scheme.

Customers with default, deemed or variable tariffs will receive a per-unit discount up to a maximum of the difference between the Government rate and the average wholesale price over the period – the maximum discount is expected to be around £405 per MWh for electricity and £115 per MWh for gas.

For customers on flexible purchase contracts, typically those with the highest energy needs, the level of reduction will be calculated by suppliers, subject to the same maximum discount.

A parallel scheme will be established in Northern Ireland.

Jonathan Reynolds, the shadow business secretary, said: ‘It is farcical that the Tories have been unable to tell businesses at the sharp end of the energy crisis what they plan to do to help them until now. Labour has been calling for support since the start of the year.

‘Businesses have been crying out for detail on these plans and, even now, there are still questions about how much this will cost and who will pay for it.

‘We have known a crisis of this scale has been coming for months and Conservative dither and delay has forced too many businesses to close, with the future still looking bleak.

‘While the Tories prioritise the profits of oil and gas producers, Labour will always be on the side of business and the jobs they create.’

Guy Adams, who runs the Isle of Barra Beach Hotel in the Hebrides, said he had been quoted a 377.66 per cent increase in his energy bills which ‘would probably most likely have finished us off’.

He told BBC Radio 4’s Today programme: ‘It would not have just been that one bill, all our suppliers would have been getting roughly the same.

‘The charges would have gone to such an extent where at present our cheapest room rate is £110 per night, we would have had to raise that to £415 per night – literally that would be the cheapest rate and there just aren’t people who would pay that sort of money.’

He added ‘what the Government isn’t allowing for’ is that his seasonal hotel will close at the end of this month and he is in an ‘absolutely impossible situation’ to set prices for bookings for when it is due to reopen in May.

He told the programme: ‘The fact that it is going to be reviewed in six months is not practical and also it will still take the rates up considerably more than people would be prepared to pay.

‘They will be paying rates they would expect to pay in London. They will not be paying rates they expect to pay in the Hebrides.’

Truss declares war on tax: PM ‘will cut stamp duty’ to boost economy in emergency Budget as well as reversing NI hike and ditching corporation tax and City bonus cap

Liz Truss is preparing to wield the axe on tax in the ’emergency Budget’ this week – with slashing stamp duty on the cards.

The package being laid out by Chancellor Kwasi Kwarteng on Friday will ease the pressure on struggling families by reversing the national insurance hike.

It is also set to ditch the increase to corporation tax scheduled for next year, and scrap the cap on City bonuses – with the PM insisting she is willing to take ‘unpopular’ decisions that benefit the rich in order to revive the economy.

However, there is speculation that the ‘rabbit in the hat’ for Mr Kwarteng’s statement will be a cut to stamp duty, designed to keep the housing market moving as interest rates rise. Downing Street did not deny the report in The Times.

The risks of the extraordinary tax-cutting strategy were laid bare this morning with official figures showing the government borrowed another £11.8billion in August, and the cost of servicing the debt mountain reached a record £8.2billion.

But Ms Truss has made clear that she is determined to focus on growth, arguing that everyone gets wealthier when the ‘pie’ gets bigger.

Separate HM Revenue & Customs statistics today showed stamp duty receipts were up 29 per cent for April-August at £2billion.

In other developments today:

• Business Secretary Jacob Rees-Mogg has announced details of energy bill support for firms, which is expected to save them around a third on costs;
• Ms Truss is bracing for a tense meeting with Joe Biden in New York tonight after the US president condemned ‘trickle down’ economics and the White House said he will raise the Northern Ireland Brexit row;
• Vladimir Putin has dramatically stoked the Ukraine crisis by declaring a partial mobilisation of the Russian army.

‘I am sick and tired of trickle-down economics. It has never worked,’ the US President said.

While his criticism was surely for a domestic audience, it underlined the differences between the two leaders’ stances just as Ms Truss says she wants to foster closer ties with international allies.

Ms Truss was asked during a round of broadcast interviews on the 102nd-floor observatory of the Empire State Building if she is prepared to be unpopular.

‘Yes. Yes, I am,’ she replied to Sky News.

‘What is important to me is we grow the British economy because that’s what will ultimately deliver higher wages, more investment in towns and cities across the country. That’s what will ultimately deliver more money to people’s pockets.

‘In order to get that economic growth, Britain has to be competitive. If we put up taxes, if we have arbitrary taxes on energy companies, if we have high corporation tax, we’re not going to get that investment and growth…’

She insisted the cost to the taxpayer of her energy package, being paid for by borrowing rather than a windfall tax on the profits of energy and oil giants, is ‘not what has been projected’, with estimates as high as £150 billion.

The Resolution Foundation think tank has said Ms Truss’s tax plans and energy support will see Britain’s richest households getting twice as much support with living costs as the poorest households.

Ms Truss accepted the benefits would fall in favour of the rich – at least initially – but rejected claims of unfairness as she bet on growth trickling down to the rest of society.

‘I don’t accept this argument that cutting taxes is somehow unfair,’ she told Sky.

‘What we know is people on higher incomes generally pay more tax so when you reduce taxes there is often a disproportionate benefit because those people are paying more taxes in the first place.

‘We should be setting our tax policy on the basis of what is going to help our country become successful. What is going to deliver that economy that benefits everybody in our country.’

She claimed that criticism that it was unfair to fund cuts by borrowing to be paid for by future generations is ‘what people on the left of politics often express’, despite polling suggesting a windfall tax would be popular.

Ms Truss confirmed to the BBC that she will be reversing the national insurance hike and axing the planned corporation tax rise that were the policies of Boris Johnson’s administration.

‘I’ll always work to make sure that we are helping those who are struggling. That’s why we took the action that we took on energy bills because we didn’t want to see households facing unaffordable bills,’ she said.

‘And that’s why we’re going to take the action on national insurance, reversing that increase as well.

‘So, yes, we do have to take difficult decisions to get our economy right.

‘We have to look at our tax rates. So corporation tax needs to be competitive with other countries so that we can attract that investment.’

With Ms Truss anticipating a general election in 2024, she is gambling that benefits will come from potentially unpopular policies such as that on bankers’ bonuses.

Critics have taken issue with the timing of lifting of the bankers’ cap limiting pay-outs to twice their salaries, with the cap introduced by EU legislation in the wake of the 2008 financial crisis.

She said the priorities of voters will be issues such as job opportunity, investment, high street improvement, road building and phone signals at the next general election.

The Institute for Fiscal Studies says that cancelling the corporation tax rise will cost £17 billion per year, though the think tank acknowledges the figure does not account for how the move might affect investment.

The financial experts also say the reverse in the national insurance hike will cost £13 billion annually.