Why won't Truss make the energy companies pay for rising energy costs?

 

UK Prime Minister - Liz Truss

Cutting taxes and freezing energy bills at the same time, seems like something of a conundrum. But that is what Liz Truss says she's intending to do. Where's the money coming from? The government say they're going to borrow the money as they would have to do to finance Lizzie's tax cuts which will largely benefit those on higher incomes. 

We're constantly told there's no magic money tree. Yet, the Tories don't seem keen on increasing taxation on the energy companies that are making colossal profits because of higher prices, or the rich, who won't be struggling with the cost of living or paying their fuel bills. You don't hear the Tory government calling on energy companies to exercise restraint over prices and profits, as they urge the workers to do with their pay claims. I don't doubt that something needs to be done about spiraling energy prices, because higher energy costs are likely to have a domino effect throughout the whole British economy leading to higher prices for everything - higher inflation, businesses closing, and higher unemployment. As they say, for some people it will be a choice between heating and eating and we could see people dying of hypothermia. 

The campaign group, 'Don't Pay UK', has called for mass non-payment of energy bills to force the energy companies to reduce energy prices. The Money Saving Expert (MSE), Martin Lewis, says it would "cause exponential problems" for consumers as well as energy companies. Boycotts and non-payment campaigns can be an effective means of exerting leverage. But don't be surprised if you start to see energy companies offering discounts on bills to those who pay by direct debit. OVO Energy are to offer customers a £400 discount within weeks if they pay by direct debit. 

The cost of freezing energy bills is going to be costly. According to The Times, it could be between £90bn and £130bn. There are only three ways the government can pay for freezing energy bills; it borrows the money, it raises taxes, or it prints the money. Higher inflation leads to higher interest rates and increases the cost of borrowing. 

UK inflation is at a 40-year high and is expected to peak at 16% next Spring. Last month, an analysis by the FT, suggested that government debt servicing costs, are likely to double from £50bn to £95bn by next year, and that doesn't include the cost of borrowing to freeze energy costs or anything else. The Bank of England has also warned of a forthcoming economic recession, which would mean less tax revenue. With the self inflicted economic problems arising from Brexit, the COVID pandemic, and the Russians using energy supplies to Europe as an instrument of warfare, these problems are not going to go way soon.