Liz Truss could freeze bills to avoid energy ‘Armageddon’

Liz Truss is expected to beat Rishi Sunak and be announced as the new Conservative leader - Shutterstock
Liz Truss is expected to beat Rishi Sunak and be announced as the new Conservative leader - Shutterstock

Liz Truss is considering freezing energy bills for millions of households this winter if she wins the Conservative Party leadership race, the Telegraph understands.

Campaign sources familiar with discussions, and energy company insiders who have been consulted, have said that a freeze of some form is now expected.

Shortly after midday on Monday, the contest to succeed Boris Johnson will formally end, with either Ms Truss or Rishi Sunak, the former chancellor, announced as the next Tory leader.

The winner, as chosen by Conservative Party members, will then become prime minister on Tuesday.

Ms Truss is the clear favourite, having consistently led in opinion polls of Tory members throughout the summer - though both sides insisted on Sunday night that the result was not yet a certainty.

Whoever wins, one of their first priorities will be to address the cost of living crisis.

In an interview on BBC One’s Sunday with Laura Kuenssberg, Ms Truss moved to reassure the public that help was coming if she becomes prime minister, vowing to reveal a support package within a week.

The Foreign Secretary said the rise in energy bills did not have to mean “Armageddon” this winter and declined to rule out a bills freeze for some households.

Annual energy bills for the average household are set to jump from £1,971 to £3,549 from this October when the change in the price cap kicks in.

It comes as Olaf Scholz, the German chancellor, on Sunday announced an energy bills relief plan worth about 65 billion euros, reflecting the major interventions being taken elsewhere in Europe.

In the BBC interview, Ms Truss said: “I will act if I’m elected as prime minister. I will act immediately on bills and on energy supply because I think those two things go hand in hand.”

Pushed on whether she would rule out an overall freeze on energy bills – a policy proposed by the Labour Party and energy companies – Ms Truss declined to do so.

“I’m not going to go into details of what a putative announcement would be before because I think it would be wrong to do that,” she said.

She added: “I don’t think we should be predicting a sort of Armageddon scenario. I think we are in a good position to deal with what are very tough challenges.”

Scottish Power has proposed a £100 billion plan for a two-year energy bill freeze, financed by loans underwritten by the Treasury. The proposal is backed by other energy firms.

One energy company source said the idea has been “extremely actively explored” by Truss campaign figures and that Kwasi Kwarteng, the Business Secretary tipped to become chancellor if Ms Truss wins, appeared “very open” to options for a freeze.

A second industry source confirmed the proposal was being scrutinised by the Truss campaign.

Truss team insiders have told The Telegraph the same. One said: “I’m confident there will be a mechanism introduced that freezes bills”. Another said the idea had been discussed “quite a lot in the last fortnight”.

The specifics of such an energy bills freeze – exactly who would benefit, how long for, at what price level and the degree to which the taxpayer would cover the cost – remains a point of debate, according to sources.

A Truss campaign spokesman declined to comment.

During the leadership contest, Ms Truss faced criticism from the Sunak campaign for saying in a newspaper interview she would prefer not to give “handouts” as the solution to the cost of living crisis.

She has rejected calls to detail what financial help she would give people, instead pointing to her wider tax cut promises.

However, there is speculation that her yet-to-be finalised package of energy support measures, combined with her promised tax cuts, could end up costing as much as furlough, the £70 billion government scheme which paid the salaries of millions of private sector workers during the pandemic.

Some criticism of the idea of an energy bill freeze was emerging from Truss supporters on Sunday night.

Prof Patrick Minford, who teaches applied economics at Cardiff University and was named by Ms Truss as a backer of her economic approach earlier in the campaign, raised concerns.

He said while the move could be politically popular, it would not be as effective in tackling the energy price crisis as other measures, such as a VAT reduction.

“A freeze looks tempting quite often. The problem is from an economic point of view it is not the most desirable way to do it,” Prof Minford told The Telegraph.

One opinion poll published this weekend found 82 per cent of respondents favoured freezing the energy price cap at its current level, while just 11 per cent disapproved.

On Sunday with Laura Kuenssberg, Ms Truss was also questioned about her plan to reverse the National Insurance rise, and whether it would benefit higher earners more.

She said: "The people at the top of the income distribution pay more tax – so inevitably, when you cut taxes you tend to benefit people who are more likely to pay tax."

But she added: "To look at everything through the lens of redistribution I believe is wrong. Because what I'm about is growing the economy – and growing the economy benefits everybody."