UK government to cap domestic energy prices

UK PM Liz Truss leaves 10 Downing Street, for the House of Commons Thursday. Pic/AFP

British Prime Minister Liz Truss said Thursday that her government will cap domestic energy prices for homes and businesses to ease a cost-of-living crisis that has left people and businesses across the UK facing a bleak winter.

Truss told lawmakers in Parliament that the two-year ‘energy price guarantee' means average household bills will be no more than £2,500 ($2,872) a year for heating and electricity. Bills had been due to rise to £3,500 ($4,000) pounds a year from October, triple the cost of a year ago. Bills are skyrocketing because of Russia's invasion of Ukraine and the economic aftershocks of Covid-19 and Brexit.

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"We are supporting this country through this winter and next and tackling the root causes of high prices so we are never in the same position again," Truss told lawmakers. Business and public institutions like hospitals and schools will also get support, but for six months rather than two years.

The government says the cap will cut the UK's soaring inflation rate by 4 to 5 percentage points. Inflation hit 10.1% in July and has been forecast to rise to 13% before the end of the year. The government hasn't said how much the price cap will cost, but estimates have put it at over £100 billion ($116 billion).

Truss is also likely to greenlight more oil and gas extraction from the North Sea and end a ban on fracking in Britain. Both measures will be condemned by environmentalists. Fracking, which involves extracting shale gas from rocks by breaking them up with water and chemicals at high pressure, was banned in 2019 after the country's oil and gas authority said it was not possible to predict the magnitude of earthquakes it might trigger.

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