There has been no market price subsidy on this scale in British history. Estimates of the final bill for taxpayers range from £100bn to £200bn, or more than the annual cost of running the NHS – if the scheme for households lasts for two years, as promised, and the separate one for all businesses is in place for six months, to pursue a less ambitious business plan for another 18 months. Early tomorrow business secretary Jacob Rees-Mogg will announce the mechanism to subsidize energy costs for businesses from October 1 and announce more details on the energy price guarantee for households. All we know so far is that the unit prices for gas and electricity for households will be set at levels that would mean the average bill would be around £2,500 a year. However, I’ve done a little digging and this is what I’ve uncovered. According to industry sources, an average bill of £2,500 entails a gas price of around 10p per kWh and an electricity price of 34p per kWh. For natural gas, this equates to a price per heat of £2.93, which – according to figures provided by consultancy Cornwall Insight – compares with a wholesale market price for six months of natural gas for delivery from 1 October 4 .£67. The market price will be £4.32 per heat for a year’s worth of natural gas from 1 October. We know that households and businesses will be charged more or less the same for each unit of energy they use. So for businesses to be charged the government-guaranteed price of £2.93 for the next six months, or the price implicitly promised by Prime Minister Liz Truss, taxpayers will have to cover the difference between that £2.93 and the market price. £4.67. And for households to be charged the guaranteed price of £2.93 for a year, taxpayers would have to cover the difference between £2.93 and £4.32. This is a subsidy of more than a third of the price for businesses and a fraction of less than a third for households. At the level of the entire economy, it will be a huge, impressive subsidy. It is a scale of intervention that would give even socialist governments pause for thought. It is implemented by a prime minister and a government who have made it their mission to reverse state intervention and free up the private sector. You can decide whether this is a paradox or just a contradiction.
