Liz Truss is expected to announce plans to freeze energy bills at about £2,500 a year – but will not claw back the cost through customers’ future bills, leaving the taxpayer to pick it up instead.
The £400 universal handout to be given to households this autumn is expected to be factored in, so the energy price cap would effectively be maintained at about the current £1,971 rate.
Tory sources confirmed that wholesale gas prices could be capped, meaning the new prime minister’s plan would also help thousands of small businesses teetering on the brink of collapse.
The scheme, which could cost as much as £90bn, would be paid for by extra borrowing, after Kwasi Kwarteng, expected to be the new chancellor, made the case for some “fiscal loosening”.
It suggests that Truss has rejected the leading proposal from the Treasury and energy firms to freeze bills and add the cost over the next few years to customers’ bills. Critics had warned it could be difficult to justify when energy firms were making huge profits.
The current energy bill price cap is £1,971 a year, rising to £3,549 as of 1 October. But the cap is due to be revised in January, with some analysts predicting it could top £5,000 a year.
Truss campaign sources say the new prime minister “understands” that people and small businesses are struggling and will need help to get through a tough winter.
But they cautioned that the plans, which were originally expected to be announced on Thursday but could yet slip to next week, were still being worked through.
Truss is also expected to announce a plan to address long-term energy security and supply to make sure the UK is not in a similar position every winter, rather than applying sticking plasters each year the energy crisis continues.
Labour has called for an energy price freeze, paid for by a windfall tax on oil and tax giants. But Truss has ruled out a windfall tax to cover the multibillion-pound cost.
Another Tory source claimed that Team Truss had been “going round the houses” with the Treasury on the energy plan, but was finally close to agreeing a deal. They added: “She hadn’t made her mind up yet and different people were trying to bounce her into their plan.”