Liz Truss energy announcement: Everything we know so far as new Prime Minister sets out energy plans

The policy, which could end up being of the scale and cost of the Covid support schemes, and bailout of the banking sector during the financial crisis, will also seek to increase the amount of energy produced by the UK.

It is one of the Prime Minister’s first announcements since taking office on Tuesday, and could affect every person and business in the country.

Here are the main things that you need to know:

How will this affect my household bills?

The Government will fix the wholesale cost of energy, which will in turn bring down the cost of your household bills from what they were expected to rise to next year.

This is called the Energy Price Guarantee, and will last for two years from 1 October.

This will mean that average household energy bills will be around £2,500 a year, and will be, in effect, a new energy price cap, which will supersede that of Ofgem.

Speculation earlier this year suggested that the price cap could rise to as much as £6,000 per year for the average household from next April.

Liz Truss claims that this will save the average household £1,000 a year, and will include the suspension of green levies (a portion of your bill which goes to fund energy-efficiency schemes).

How will this affect my business and the ones I go to?

Businesses do not have a price cap, like households, so the Government has taken a different approach to offer similar support.

There will be a six month scheme which will be available to all businesses, and will see the government intervene on the wholesale cost of energy.

Energy bills fluctuate enormously between companies, so the Government has not given a direct cost of how much it will save businesses.

After six months, support will then be moved to only vulnerable sectors, including the hospitality industry, such as pubs which are facing closure this winter.

The business secretary will review which businesses will need more long-term support, which will be concluded within three months to give businesses an idea of if they will get more support when the initial scheme ends.

How much is this going to cost?

The scheme will cost tens of billions of pounds. We do not know exactly how much, but it is estimated that it could cost between £90-£200 billion.

The Government will be conducting forecasts on how much the scheme will end up costing, which will most likely be announced when Kwasi Kwarteng makes a “fiscal statement”, in effect an emergency budget, later this month.

It has not been confirmed whether the Office for Budget Responsibility (OBR), which provides forecasts for every year’s budget, will be doing the forecast, or whether it will be done by the Treasury.

Who is going to pay for it?

This will be paid for, in part, by general taxation: the current amount of money that families pay in tax.

It will also be paid for by more borrowing by the Government, and will increase the amount of debt that the country has.

If the Government wants to pay off this debt in the future, then it is predicted that this will result in cuts to other areas of spending.

It will not be funded by a further windfall tax on the record profits of energy companies, as called for by Sir Keir Starmer and the Labour Party.

Liz Truss said she is opposed to this, as she argues it discourages energy companies from investing in the UK, which could mean we produce less energy at the very time the Government wants to increase it.

Will fracking now start in my area?

Liz Truss confirmed that the ban on fracking, which is the drilling for shale gas, will be lifted today.

It was stopped by the Government in 2019 after a report by the Oil and Gas Authority concluded that technology could not predict the likelihood of tremors which affect local communities.

Ms Truss said that this could start producing gas in the next six months, and licences could be granted if they have “local support”.

There is no further detail on what this local support would be, whether it is the consent by the local council or something else.

One option being explored is whether local communities could be offered a discount on their energy bills in return for approving planning in their area.

Will we start drilling for more oil and gas in the North Sea?

Liz Truss announced in the House of Commons that the Government will launch a new round of licensing for oil and gas drilling as early as next week.

This is expected to lead to over 100 new licences.

Will we build more nuclear power plants?

The Government has reiterated its intention for the UK producing 24GW of nuclear energy by 2025.

New projects will be steered by a new body called Great British Nuclear, and comes after Boris Johnson promised £700m of funding for the Sizewell C plant.

I live in a rural area and am not connected to the gas grid, will I also get help?

Those who are effectively “off-grid”, such as those who live in rural areas and use heating oil rather than paying for mains gas and electricity, will be given access to a fund which is expected to give “equivalent” support.

This includes those living in park homes, and further details are expected in due course, such as in the Chancellor’s fiscal statement later this month.

What effect will this have on inflation?

It is hoped that this will cut about 5 per cent off the peak point of inflation next year.

The peak next year is expected to be around 13 to 18 per cent.

What if we have another energy crisis like this in the future?

The Government has set out its ambition to up its supply of oil, gas, nuclear and renewable energy such as wind.

Liz Truss has said that the UK now has an ambition to be an energy exporter, rather than importer, by 2040.

This effectively means that the country would be energy self-sufficient and would be making money from selling energy to places like Europe.

Is this enough to help people?

Both Labour and the Liberal Democrats have said that this is not enough and will mean the burden of the bailout is ultimately passed onto the taxpayers.

Ed Davey, the Lib Dem leader, has called this a “phoney freeze”, because the £2,500 new energy cap is almost double the £1,277 price cap last October, and an increase of £500 on the current price cap.

This points to the argument that some families are already struggling on the current price of bills, freezing the prices for two years may still be something that many could not afford.

Is the government cutting fuel duty so it’s less expensive to fill up my car?

Liz Truss said that Kwasi Kwarteng, her Chancellor, is looking into cutting prices at the pump as part of his fiscal statement later this month.

Will I be asked to use less energy?

No. Despite calls for a national campaign to reduce household energy use, the Government is not planning to ask families to reduce how much heating or electricity they use.

Businesses, however, will be asked to look at ways that they can improve their energy efficiency.