Britain borrows big again to ease energy shock

Britain’s new leader Liz Truss capped soaring consumer power bills for two years on Thursday in a package to limit the economic shock of war in Ukraine that could cost about 150 billion pounds.

With Britain facing a lengthy recession sparked by a near quadrupling of household energy bills, Truss – appointed prime minister on Tuesday – set out what she described as bold immediate action to protect consumers and businesses.

She told parliament that average household bills would be held at around 2,500 pounds a year for two years, preventing the expected 80% leap that was due in October, threatening the finances of millions of households and businesses.

With wholesale gas prices remaining highly volatile, Truss did not put a price on the package but Deutsche Bank have estimated that the energy price offset plus Truss’s promised tax cuts could cost 179 billion pounds, or about half the sum Britain spent on the COVID-19 pandemic.

The scale of the plan, funded by government borrowing, has rattled financial markets. The pound fell against the dollar on Wednesday to levels last hit in 1985 and slid back towards that lowon Thursdayahead of confirmation of the package from Truss.

The full cost is likely to be given at a later fiscal update by new Chancellor Kwasi Kwarteng.

The announcement marked a major turnaround from a leader who had ruled out “handouts” during her campaign to succeed Boris Johnson but is now forced to act to stop families falling into destitution and businesses from going bust.