Keith Anderson, chief executive of Scottish Power, has proposed capping household energy bills at around £2,000 a year. Anderson’s proposal, reported by the Financial Times to Business Minister Kwasi Kwarteng last week, underlines the scale of the crisis engulfing Britain from unprecedented gas price rises. Under Scottish Power’s proposal, suppliers would cover the gap between the cap and the wholesale price of gas and electricity by borrowing from a “deficit fund”, which the government would arrange through commercial banks. The cost will then be gradually repaid by the public – through government borrowing or spread acoss accounts (or a combination of the two). The FT adds that: People familiar with the discussions said the “mood music” in the government had changed in recent weeks as gas prices have risen, with Russia cutting supplies to Europe in retaliation for sanctions related to its invasion of Ukraine. Ofgem is due to announce on Friday that the UK energy price cap will rise by around 80% in October, to around £3,550, from £1,971 today. The cap is expected to jump again in 2023, with analysts at Cornwall Insight predicting a rise to £4,101 in January – which could push UK inflation up to 18% early next year. Updated at 08.32 BST Important events BETA filters Key Facts (3)Scottish Power (3)Kwasi Kwarteng (3)UK (3)
Sunak: Borrowing tens of billions to freeze accounts would be dangerous
Rishi Sunak, one of the two candidates to succeed Boris Johnson as Prime Minister, criticized proposals for a blanket freeze on energy bills. Speaking on Radio 4’s Today Programme, Sunak warned that high energy costs are a challenge that will be with us for some time – and said he would focus help on the poorest households. Asked why he was not in favor of freezing energy bills (as proposed by Scottish Power, both Labor and the Lib Dems), Sunak argued the cost would be a risk given the “scale and duration” of the challenge. Sunak said: We need to make sure that what we do is not only affordable, but also not going to make inflation worse. At a time when we are already borrowing an enormous amount of money, I think that introducing policies and programs that add not just tens of billions, but tens and tens and tens and tens of billions of pounds on a permanent basis to our borrowing is dangerous. Sunak’s plan is to cut VAT on energy bills and build on his existing support package with more support for low-income households and pensioners. The former chancellor said his cost of living package, announced in May, provided “significant support” of up to £1,2000 for the most vulnerable, which at the time would cover rising bills [but is now inadequate]. That is my background on this, and as Prime Minister I would do exactly the same thing. Is this a hint that poorer households could be shielded from rising bills under a Sunak government? Rishi Sunak has indicated that it would essentially cover the entire rise in energy bills for the poorest? Says as chancellor he raised £1,200 for the poorest – about the same as the price rise then “That’s my background – as Prime Minister I would do exactly the same thing” — Kate Ferguson (@kateferguson4) August 24, 2022 Although he adds that you can’t continue to borrow tens of billions without fueling already soaring inflation — Kate Ferguson (@kateferguson4) August 24, 2022 Should we tell the British to use less energy this winter to improve their rocket bills? Rishi Sunak: “We have to look at all options” — Kate Ferguson (@kateferguson4) August 24, 2022 The Institute for Government also warned that more support would be needed for energy bills beyond this year, costing tens of billions of extra pounds. In their new paper outlining the government’s options, they say:
So far support is focused on the 2022/23 winter, but current forecasts are for energy prices to be just as high, if not higher, next year. The new prime minister should be ready to provide further support again. Offsetting the same percentage of bills next year would cost around £90bn. Given how long the crisis is expected to last, the government should also consider other measures to tackle high energy bills, including investing in energy efficiency.
Updated at 08.20 BST The new prime minister should be ready to provide further support again. Offsetting the same percentage of bills next year would cost around £90bn. Given how long the crisis is expected to last, the government should also consider other measures to tackle high energy bills, including investing in energy efficiency. Rowena Mason Ministers could face an additional £23bn price tag to cover £900bn of extra household energy costs in the autumn, rising to £90bn next year, according to a new paper from the Institute for Government. The paper, looking at the options for Liz Truss or Rishi Sunak in No 10, also warned that the government should plan for sustained rises in energy bills by going much further than making public appeals to use less gas – for example by telling consumers about cost savings from turning off thermostats – and a commitment to building more energy-efficient homes to protect consumers. No 10 and Kwasi Kwarteng, the business secretary and a close Truss ally, are resisting calls for the public to use less energy. But the next prime minister, likely to be Truss, faces some very tough choices when he takes office about how far to subsidize energy bills. Here’s the full story: Updated at 08.05 BST The BBC’s Simon Jack has more details on Scottish Power’s pitch to ministers: 3/ …for the next two years. £100 billion is Scottish Power’s best estimate of the difference between the cost of buying power and the current cap of £1971. Sources close to the company said Kwasi Kwarteng will be the next chancellor. — Simon Jack (@BBCSimonJack) August 23, 2022 4/ ..if Liz Truss is the next PM, she was generally receptive to the idea. Sources close to Kwasi Kwarteng would not be swayed by his enthusiasm. “We had a meeting about it – that’s all.” The so-called deficit fund will be paid off through bills over the next 20 years or so… — Simon Jack (@BBCSimonJack) August 23, 2022 5/ Ress-Mogg’s presence was deemed so important as he is a key ally of Liz Truss, Energy is urging ministers to consider the energy crisis in need of a COVID-scale intervention. The leave scheme which paid the wages of 11 million people cost around £70bn. — Simon Jack (@BBCSimonJack) August 23, 2022 Keith Anderson, chief executive of Scottish Power, tells STV News that energy costs must be frozen “now” ahead of a meeting with First Minister Nicola Sturgeon yesterday. He proposed the same plan he presented to UK Business Secretary Kwasi Kwarteng and fellow UK minister Jacob Rees-Mogg, to freeze the accounts at current levels – at a cost of £100bn. STV says: Scottish Power has proposed a £100bn plan to freeze energy bills for two years in the face of a crisis that is “bigger than the Covid pandemic”. The energy giant, which supplies gas and electricity to more than five million customers, has warned that the impending jump in energy prices will be “truly horrific” for many people.
Protecting UK households from fuel bill crisis ‘set to cost £100bn’
The head of one of the UK’s biggest energy groups is proposing a £100bn rescue plan to protect households from rising bills over the next two years. Keith Anderson, chief executive of Scottish Power, has proposed capping household energy bills at around £2,000 a year. Anderson’s proposal, reported by the Financial Times to Business Minister Kwasi Kwarteng last week, underlines the scale of the crisis engulfing Britain from unprecedented gas price rises. Under Scottish Power’s proposal, suppliers would cover the gap between the cap and the wholesale price of gas and electricity by borrowing from a “deficit fund”, which the government would arrange through commercial banks. The cost will then be gradually repaid by the public – through government borrowing or spread acoss accounts (or a combination of the two). The FT adds that: People familiar with the discussions said the “mood music” in the government had changed in recent weeks as gas prices have risen, with Russia cutting supplies to Europe in retaliation for sanctions related to its invasion of Ukraine. Ofgem is due to announce on Friday that the UK energy price cap will rise by around 80% in October, to around £3,550, from £1,971 today. The cap is expected to jump again in 2023, with analysts at Cornwall Insight predicting a rise to £4,101 in January – which could push UK inflation up to 18% early next year. Updated at 08.32 BST
Introduction: Brent crude returns to $100/barrel
Good morning and welcome to our rolling coverage of business, the global economy and financial markets. The threat of OPEC production cuts has pushed Brent crude above $100 a barrel, adding to inflationary pressures in economies. The benchmark oil price rose above $100 a barrel for the first time in more than a week last night after Saudi Arabia hinted that the OPEC group could cut production. Brent had fallen as low as $91.50 earlier this month, from $125/barrel in June. And that prompted Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, to invoke the idea of OPEC+ production cuts to prop up prices. Brent crude oil price in 2022 Photo: Refinitiv Prince Abdulaziz warned that there was “extreme” volatility and illiquidity in the oil market. That (he argued) means futures prices are not reflecting underlying supply and demand fundamentals, which could prompt the group to boost output when it meets next month to review output targets. Prince Abdulaziz added: “Recent damaging volatility disrupting basic market functions and undermining the stability of oil markets will…
