Liz Truss’s energy U-turn leaves market in chaos

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{"text":[[{"start":12.08,"text":"When she announced her two-year energy price guarantee, Prime Minister Liz Truss decried the “decades of short-term thinking” that had left the UK facing an energy crisis. "}],[{"start":20.92,"text":"Her long-term approach has lasted less than six weeks. "}],[{"start":25.17,"text":"The chancellor Jeremy Hunt’s announcement on Monday that the £2,500 energy price guarantee for a typical household will end in April leaves the energy market in chaos, with total uncertainty about who will be supported, at what prices, or in what way come next spring. "}],[{"start":40.42,"text":"A government that has spent months rejecting windfall taxes on the basis of protecting investment (before effectively levying them anyway) has injected a particularly pure form of political risk into the market for UK energy supply — and has again pushed at least part of the financial stresses of soaring energy costs back on to households. "},{"start":57.449,"text":"On current wholesale gas prices a typical annual bill could be £4,000 come next April. "}],[{"start":63.35,"text":"This U-turn — as well as the gutting of the Trussonomics “mini” Budget — was of course forced by turmoil in the markets. "},{"start":69.82900000000001,"text":"The energy price guarantee for households and businesses was blunt and expensive, expected to cost £60bn just for the first six months. "}],[{"start":78.69,"text":"But in accepting the need to target support where it is most needed, and to embed incentives to curb usage particularly for wealthier households, it is also simply bending to policymaking sanity. "},{"start":88.969,"text":"“The original scheme was an unsustainable, unfunded guarantee,” says Adam Bell, at energy consultancy Stonehaven. "},{"start":95.97399999999999,"text":"“This feels like the grown-ups being back in charge. ”"}],[{"start":99.96,"text":"After all, the broad brush, universal nature of the Truss scheme was a direct consequence of months of Conservative psychodrama, where time that could have been spent designing a properly targeted approach was squandered. "},{"start":111.22699999999999,"text":"It is a given that those on benefits will need ample help with high energy bills. "},{"start":115.357,"text":"The question was how to train support higher up the pay distribution, getting tax or income information in one bit of government to interact with databases elsewhere. "},{"start":123.612,"text":"The IT project required could have taken six to 18 months, on some estimates, and should have started in earnest months ago. "}],[{"start":130.84,"text":"There is now some time for the Hunt-led Treasury to consider how to do this properly. "},{"start":135.544,"text":"At the moment, though, it remains entirely unknown who will be asked to pay what from April, or for how long. "},{"start":141.774,"text":"It could be that, given the challenge of devising an entirely new system, some portion of the market finds itself back on the increasingly irrelevant Ofgem tariff cap, while another section of households is insulated from wholesale market moves through a social tariff. "},{"start":155.11700000000002,"text":"There could, says Bell, be some graduated scale in between. "},{"start":159.447,"text":"Whatever happens, it will only be a stepping stone on the way to more substantial reform that separates household energy bills from international gas prices. "}],[{"start":168.19,"text":"Reopening the question of energy prices should go hand in hand with reconsidering how support is funded. "},{"start":173.932,"text":"Targeting alone may not reduce the bill to Exchequer as significantly as Hunt hopes, argues Ian Mulheirn, at the Tony Blair Institute for Global Change. "}],[{"start":182.84,"text":"How much will depend in part on the political will to impose pain on middle-income households, with knock-on consequences for spending and the economy. "},{"start":190.744,"text":"Reducing support for households not on benefits by 25 per cent could save about £12.5bn of an estimated £70bn annual cost for household support, says Mulheirn, based on typical bills at £5,000. "}],[{"start":205.38,"text":"Suppliers and generators are now in the dark about how their business will operate come next April. "},{"start":210.634,"text":"They are facing a windfall tax in the form of a cap to the revenues made from legacy renewables generation, which could yet be reformulated by the new Hunt regime. "},{"start":219.014,"text":"The industry is also concerned about the expansive powers that the Energy Prices Bill going through parliament hands to the business secretary, currently Jacob Rees-Mogg, including to modify energy licences or direct licence holders at will. "}],[{"start":232.17,"text":"It is a familiar story in UK politics in recent years. "},{"start":236.012,"text":"This government said it was prioritising certainty, stability and a good investment environment in energy. "},{"start":241.56699999999998,"text":"It has delivered precisely the opposite. "}],[{"start":243.97,"text":""}]],"url":"https://creatives.ftacademy.cn/album/001097591-1666052045.mp3"}

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Liz Truss’s energy U-turn leaves market in chaos

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