Prime minister bows to political and moral pressure with £150bn state effort –but how it will be financed still unclear
There are two main things to note about Liz Truss’s energy costs package. First, there is much detail to come. Also, it is an undeniable paradox that the first move of a prime minister surrounded by former Taxpayers’ Alliance staff is a £150bn state effort to fix commercial prices.
Much like Boris Johnson would never have wanted to be the prime minister to curtail people’s liberties more severely than anyone since wartime, it is fair to say Truss would rather not have begun her tenure in No 10 with what is known as the energy price guarantee.
One of the defining elements of Truss’s successful campaign to succeed Johnson was her repeated talk of tax cuts and suspending green levies as the primary way of helping people with soaring bills.
An early Truss campaign interview with the Financial Times even airily dismissed the idea of “handouts”. Future campaign messaging was less clear, but still resistant to what was disparagingly referred to as “Gordon Brown economics”.
As it has turned out, Truss has ended up more or less with what Brown argued for in early August: a call for a freeze on prices that pre-empted not just the government but even Brown’s Labour party.
What changed was the sheer weight of political and, what you might even term, moral pressure.
Truss was told by an array of experts that failing to take bold action would create a humanitarian disaster, with millions of households cold or hungry or both, businesses collapsing en masse, with the impact on the economy, and especially on public health inequalities, felt for a generation.
One effect of the sheer one-sidedness of the argument is that it made Truss’s decision to U-turn (whatever her aides might argue, it is a U-turn, even a gradual one) politically easier.
Responding to Truss’s statement in the Commons, Keir Starmer noted the change of stance, but made much more of Truss’s refusal to extend a windfall tax on energy firms’ unexpectedly high profits to part finance it.
It is another political paradox that Truss is not only committing about the same as the annual NHS England budget on price controls, she is doing so with little apparent plan to pay for it, beyond borrowing. An extended windfall tax would arguably have only contributed a bit, but its absence is notable, and could become a millstone for the government.
It is not only the financing that remains opaque. A lot of the mechanism for the domestic help is barely sketched out, not least how ministers will help people outside the mainstream energy market, such as those who use heating oil or people living in flats with communal energy sources that fall outside the price cap.
The plans for businesses are, so far, little more than a broad commitment: a sixth-month scheme will offer “equivalent support”, to be made more targeted after that.
There is a final political lesson from Truss’s statement, and that is that the climate emergency sceptics have much more sway in government than before, with the restoration of fracking and a commitment to 100 or more new North Sea drilling projects.
Officially, Truss remains committed to the UK’s net zero target by 2050, but her announcement of a review into how this can be met in a way that is “pro-business and pro-growth” tells another story – even if that review is led by the green-inclined Tory MP Chris Skidmore.
Time, again, will tell how much the public side with Starmer, who told MPs that “doubling down on fossil fuels is a ludicrous answer to a fossil fuel crisis”. But fracking, at least, has been repeatedly shown to be unpopular with the public.
There is, of course, one final and entirely exterior factor. With the Queen gravely ill, all of this might get forgotten amid a long period of national mourning.