Rishi Sunak is poised to halve financial support on energy bills for businesses, amid concerns about the cost, The Times reports.
Former prime minister Liz Truss announced a six-month package of support for businesses in October that capped wholesale energy prices on electricity and gas. That is expected to cost £18bn by the time it ends on March 20.
Next month Jeremy Hunt, the chancellor, will announce a 12-month extension to the scheme but with the level of support more than halved, amid concerns about taxpayers’ exposure to fluctuating energy prices.
Two approaches are being considered. Hunt said in his autumn statement that most businesses would not receive extra support, arguing that it was “not sustainable”. He said that the level of support offered by the government would be “significantly lower” and focus on the most vulnerable industries.
A targeted approach has proved challenging, however, because many energy companies do not have data about their customers. Ministers are instead looking at a reduced universal scheme, although a final decision has yet to be made. The new scheme is expected to cost less than £20bn over 12 months, compared with £40bn for the existing one. Under the scheme businesses get a discount of up to £345 for a megawatt hour of electricity and £91 for a megawatt hour of gas.
The hospitality industry has warned that a steep rise in energy costs combined with the impact of inflation “could prove fatal” for many businesses.
James Cartlidge, a Treasury minister, said this month that the government was looking to limit taxpayers’ exposure to “volatile” energy markets. He said: “The energy bill relief scheme is very generous but it is expensive and we need to ensure longer-term affordability and value for money for the taxpayer. That is why we are carrying out a review of the scheme, with the aim of reducing the public finances’ exposure to volatile international energy prices from April 2023. We will announce the outcome of the review in the new year to ensure that businesses have sufficient certainty about future support before the scheme ends in March 2023.”
The government has already announced a rise in the energy price cap for households. From April typical bills will rise by £600 from £2,500 to £3,100.
