Households face April ‘cliff edge’ as energy price freeze cut to six months
The new Chancellor has announced that the two-year energy price freeze for all households will now run for just six months, with campaigners warning that the move will lead to a steeper “cliff edge” for households.
Jeremy Hunt, who replaced Kwasi Kwarteng on Friday, has revealed the universal energy price guarantee will finish in April, with the Government launching a review on how to then support bills after this period.
The Chancellor said: “This is a landmark policy supporting millions of people through a difficult winter and today I want to confirm that the support we are providing between now and April next year will not change.
“But beyond that, the Prime Minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.”
The Government said its changed approach after April will therefore “cost the taxpayer significantly less than planned” and will target those most in need to support.
It also confirmed that the energy bill relief scheme for businesses, which will cap corporate energy bills, is also set to end in April.
Liz Truss’s government launched the energy support scheme for households at the start of last month to limit the unit cost of energy so that a typical household will pay a maximum of £2,500 per year.
However, people could end up paying more if they live in a larger household, use more energy than average or live in a poorly insulated home, for example.
The new Chancellor also said that he is abandoning plans to cut the basic rate of tax by 1p – which had been due to be brought forward to April – and that it would remain at 20p in the pound until the country can afford to reduce it.
The cut in dividend tax promised by his predecessor will also go, along with VAT-free shopping for overseas tourists, the freeze on alcohol duty and the easing of the IR35 rules for the self-employed.
Mr Hunt said the tax measures alone would bring in £32 billion after economists estimated the Government was facing a £60 billion black hole in the public finances.
In a televised statement, the Chancellor – who only took office on Friday – warned of more “tough” decisions to come.
“Governments cannot eliminate volatility in markets but they can play their part and we will do so,” he said.
Plaid Cymru Westminster leader, Liz Saville Roberts MP said: “The acting Prime Minister Jeremy Hunt, under the guise of ‘fiscal responsibility’ is planning on imposing more painful austerity on the public. The Tories have trashed the economy and are now set on forcing the poorest to pay the price once again.
“Westminster is in utter disarray – unable to give any certainty to families facing extortionate bills and rocketing mortgages. Many have budgeted under the understanding that their energy bills would be capped for two years. Backtracking on that promise is unforgivable.
“Labour’s naivety in acquiescing to the biggest tax cut of all – the basic rate of income tax – was deeply disappointing. Plaid Cymru opposed this reckless tax cut as we strongly believe in properly funded public services.
“Meanwhile, the Scottish Government is today outlining plans for a fairer, greener economy through independence. This Westminster circus must make us in Wales recognise that we too can have a more stable and prosperous future with independence.”
The pound has strengthened and UK government bonds have rallied further as Jeremy Hunt announced plans to reverse key policies in the former Chancellor’s mini budget.
Sterling rebounded by more than 1.2% to 1.139 against the US dollar shortly after Mr Hunt gave his emergency statement to calm the financial markets.
Yields on 30-year government bonds, or gilts, eased back further by around 10%, as the new Chancellor set out plans to shave off billions of Government debt.
The interest on long-dated bonds hit a low of around 4.32% shortly after the first announcement.
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