Truss in a rush, is it a race to the bottom?

With the domestic energy price cap for a typical household set to rise in October to a humongous £3,549, she announced that domestic energy bills would now be capped at £2,500 annually until 2024. The government would compensate energy firms the difference between the wholesale price of gas and energy they pay, and the amount charged to customers. The relief felt by many worried householders was almost palpable.

In her statement, which lacked clarity and any meaningful detail, businesses were also promised help, but only for six months, which was cold comfort for firms already struggling to meet payments and burdened with huge legacy debts from the pandemic and rises in supplier costs, staffing and soaring interest rates.

Truss was in a rush to set her stamp on government, but her “unashamed”, “bold and brash” dash for economic growth was, as we know, curtailed in the saddest of circumstances, overtaken and completely overshadowed by an epochal event. The death of our 96-year-old monarch Queen Elizabeth.

On Wednesday, nearly two weeks after the country was plunged into a period of national mourning, Liz Truss and her new cabinet finally got back to running the country, albeit from the UN and through pre-prepared video messages and press releases.

In an unprecedented government intervention, Business and Energy Secretary Jacob Rees-Mogg announced that a six-month multi-billion pound energy support package for businesses, charities and public sector organisations would indeed come into play from the beginning of October.

The UK government scheme means wholesale electricity prices would be fixed at £211 per megawatt hour, and gas prices capped at £75 per mwh. An important intervention that will halve energy bills for businesses this winter and save many firms from going under, but only if those discounts are in turn passed on by their energy suppliers. It should also be remembered that this cap is only taking the energy price back to April levels, which were already proving to be unaffordable to many energy-heavy businesses.

Michael Kill, CEO of the UK Night Time Industries Association, said, “We welcome the long-awaited announcement of the “Energy Bill Relief Scheme”. However, we remain concerned that the measure to cap the wholesale price to energy supply companies may not result in sufficient relief being extended by the suppliers to business customers, who remain free to impose additional uncapped mark-ups such as network charges and operating costs.

"It is also imperative that this announcement is followed up with further action by the Government, and incorporates our core asks, specifically business rates relief and a VAT reduction across the board.”

Stuart Patrick, chief executive of Glasgow Chamber of Commerce, said: “There are still other difficulties facing companies. Staff shortages, inflation and supply chain issues are all massive barriers which businesses are facing. Whilst we are encouraged that government are taking this action to address the energy costs, we still require further movement to address the overall cost of operating to help businesses thrive.”

It is hoped that the new chancellor Kwasi Kwarteng will today, in his mini budget, not make a mess of it, and accept that in order to survive, businesses need more than just a six-month energy freeze. That he will introduce a long-term business strategy to encourage growth, not a temporary sticking plaster, one which will stimulate the economy, and protect jobs and livelihoods. A major reduction in the VAT rate and a business rate relief package would do just that.

If not, I fear that this government will have hit the ground running, but only to take the UK in a race to the bottom of the abyss.