Truss rules out funding energy support with windfall tax

Published Wed, Sep 7, 2022 · 09:31 PM

Prime Minister Liz Truss said she would set out her plan Thursday (Sep 8) to help UK households and business facing soaring energy bills, as she ruled out funding the support package with a windfall tax on companies.

In her first Prime Minister’s Questions session in Parliament since formally taking office on Tuesday, Truss underlined her tax-cutting ambitions and warned that Britain could not “tax our way to growth.”

But she faced criticism from Keir Starmer, leader of the opposition Labour party, who warned she had made a “political choice” in allowing energy firms to make excess profits while working people would “foot the bill for decades.”

The exchange was a glimpse into the likely battle lines between the parties over the winter, with Truss trying to bridge the gap to Labour in opinion polls.

Starmer’s contention that support should be funded by energy firms’ excess profits – which according to Treasury estimates may reach as much as £170 billion (S$273.8 billion) over the next two years – is popular with voters but anathema to many Tories, who pride themselves as being pro-business.

All eyes were on Truss on Wednesday (Sep 7) as she addressed the House of Commons for the first time as premier, after a two-month Conservative leadership contest that exposed deep rifts within the ruling party. She’s under pressure to set out how she plans to mitigate the impact of surging inflation this winter, while meeting the smaller-state, Thatcherite promises she campaigned on.

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“I will take immediate action to help people with their energy bills but also secure a long-term energy supply,” Truss said, to cheers from rank-and-file Conservative MPs behind her. “I will take immediate action to make sure we have lower taxes and we grow the economy.”

Truss said she would set out plans for the UK to use more of its own energy supplies including oil and gas from the North Sea, and that the government is committed to building more nuclear power capacity.

She is expected to announce an economic intervention that could see the government spend as much as £200 billion over the next 18 months to contain energy prices, Bloomberg reported on Monday.

Her government is planning on capping average annual household energy bills at or below the current level of £1,971. The move would prevent household bills from jumping 80 per cent in October, after regulator Ofgem said the price cap would rise to an average annual rate of £3,548.

The plan as currently drawn up would be a major fiscal gamble – coming close to the £310 billion handed out during the pandemic – that reflects just what’s at stake as the UK grapples with the fallout of Russia’s war in Ukraine.

Her government is expected to make a fiscal statement in the coming weeks, her spokesman, Max Blain, told reporters in a regular briefing on Wednesday. He also said Truss would stick to her campaign promise to scrap a plan to raise corporation tax that was announced by Boris Johnson’s administration.

Truss also said she will press ahead with legislation that would rewrite parts of the Brexit divorce deal relating to Northern Ireland, a plan that risks exacerbating tensions with the European Union.

Asked by a Tory MP what she would do if she couldn’t strike a deal with the EU, Truss replied that he top priority is to protect the region’s peace agreement but that fixing the Northern Ireland Protocol which she said “has damaged the balance” between communities.

“I’m determined to get on with doing that,” she said. BLOOMBERG

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