LIZ Truss is set to spend nearly £100bn to freeze energy bills for households and businesses at £2,500 a year, according to reports. 

The new Prime Minister is set to address the country this afternoon, with her new Chancellor - likely to be Kwasi Kwarteng - due to set out details of the emergency package on Thursday. 

According to multiple reports, the £400 universal handout announced by Rishi Sunak back in March will still go ahead, which means the price cap would effectively be kept at the current rate of £1,971.

If correct, that means the 80 per cent rise to £3,549 planned for October 1, will not be passed on to households. 

The scheme - understood to last 18 months - will be paid for by extra borrowing, rather than a windfall tax.

According to the Times, the government will ask the energy companies to sign legally binding contracts rather than bring forward new legislation. 

Ministers will then agree to pay the firms the difference between the cap and wholesale prices.

Opposition politicians said it was wrong for the government to make taxpayers pick up the tab for the scheme.

Liberal Democrat leader Sir Ed Davey said: “Liz Truss spent weeks during this summer leadership contest leaving families and pensioners worried and in limbo by refusing to set out her plans to tackle soaring energy bills.

“Now she seems set to make our children pick up the tab for this mess, while letting oil and gas firms making record profits off the hook.”

However, Paul Johnson, director of the Institute for Fiscal Studies, said a freeze may be unavoidable despite its enormous cost. “It’s really hard to think of something else you can make work this winter,” he said.

Torsten Bell, chief executive of the Resolution Foundation, warned that millions of households will still face a tough winter, despite the new scheme.

“Even with the big policy announcement this week, households will be getting poorer,” he told MPs on Tuesday morning.

“They don’t have lots of non-essential spending and luxuries they can cut to pay their energy bills and that context is really worrying.

“Thousands of people will have their energy cut off this winter.”

The economist stressed that the situation will be particularly tough for people on pre-payment meters, as they may not be able to build arrears.

Other customers are likely to build up “very large arrears” which could damage their credit ratings and have a long-term impact to their financial wellbeing.

Clare Moriarty, chief executive of Citizens Advice, stressed to MPs that her advisers are “already seeing a cost-of-living crisis” in communities across the UK, irrespective of whether households face soaring bills in October.

She said: “We estimate that at least one in five people won’t be able to pay energy bills in October if nothing is done.

“We hear the messages about support packages, but right here on the ground we are already seeing very large numbers of people who simply cannot keep lights on and food on the table.”