UK businesses, charities and public sector bodies will finally find out what support they will get to help them overcome the energy crisis – but will it be enough? The government is expected to announce today a cap on wholesale gas and electricity costs for these groups, in the second part of an energy price guarantee to reduce soaring bills. The scheme, to be announced by business secretary Jacob Rees-Mogg, is expected to reduce the rate of electricity and gas for non-household users by around 50% and 25% respectively, compared to current contracts. It is likely to cost tens of billions of pounds, depending on how high wholesale energy prices remain. Two weeks ago, Liz Truss promised “equal support” for businesses and public sector organizations next winter when she announced the government would cut domestic bills by an average of £2,500 a year But while this domestic cap is for two years, business support can only last six months for many companies. The discounts are to apply to contracts signed from April 1 this year and will run for six months from October 1, Bloomberg reported last night. This would help companies weather the winter crisis, but would provide less certainty about the future. Yesterday pub chain Fuller’s revealed its energy bill would more than double this year, from £8m to £18m, without government support. And business groups have warned that the UK faces a “lost generation” of traders, adding that a cap would not affect the high charges levied by suppliers. As my colleagues Rowena Mason and Alex Lawson explain: Suppliers will be able to set their own charges and will be compensated for the wholesale price cap by the government. This would be around 21p per kilowatt hour for electricity and 7.5p per kWh for natural gas. There would be a different cap for those paying variable rates. Government sources said this was the most likely model and scale of supporting energy bills for businesses, without saying how much the overall package would cost the Treasury. Craig Beaumont, the FSB’s head of external affairs, said: “If the government wants a fixed wholesale price, tomorrow we have to figure out how it will be implemented in practice on small businesses’ energy bills. A small business should be told by their supplier, quickly, what their new account will be. “However, there may be no regulation of the other important element of small business energy bills – the fixed charge. “While consumers will have a cap on fixed charges, small businesses will not, and this means that energy providers could continue to increase fixed charges, and therefore mean that small businesses see their energy bills rise range”. We’ll also be watching financial markets today as investors prepare for another strong rise in US interest rates tonight. Economists expect the Federal Reserve to raise its key interest rate by 0.75 percentage points, the third such hike in a row, signaling plans to raise rates again in the coming months.
THE AGENDA
7 am BST: UK public finances for August 9 a.m. BST: Government’s energy support plan awaited 11 a.m. BST: CBI Industrial Trends Survey in UK Factories 3 p.m. BST: US Home Sales in August 7 p.m. BST: Federal Reserve Interest Rate Decision 7.30 p.m. BST: Federal Reserve press conference
Updated at 07.52 BST Important events BETA filters Key Facts (5) United Kingdom (7) Liz Truss (3) Business secretary Jacob Rees-Mogg was seen filming in Westminster yesterday – perhaps for an online video outlining today’s energy support package? The Times’ Sam Coates has the details: So there will be no Commons announcement from Jacob Rees Mogg tomorrow on the help for business energy bill – just a 9am Beis press release. And … maybe … an online video? This was spotted filming earlier today in Westminster. What many people are involved. pic.twitter.com/xrxrtlYF8g — Sam Coates Sky (@SamCoatesSky) September 20, 2022
IFS: UK energy support package ‘almost a panic reaction’
The UK’s energy support packages for households and businesses are “almost like a panic reaction”. That’s the verdict of Paul Johnson, director of the Institute for Fiscal Studies, this morning. He told BBC Radio 4’s Today programme: “I think something like this was inevitable. Some businesses were seeing their energy bills rise fivefold – or certainly that was likely to happen from October. “Just as households would need some protection, so would businesses. Johnson adds that the government is right to plan more targeted support for businesses in six months. “I wish they had done the same for households because for households and for businesses this is something of a panic reaction. “You have to do something and all they can do immediately is protect everybody, whereas in the medium term, if this continues, we really want something more targeted.” The prospect of a stamp duty cut in the UK has boosted shares of UK housebuilders. Persimmon (+4.6%), Barratt (+3.6%), Taylor Wimpey (+3.3%) and Berkeley (+3%) were among the top FTSE 100 gainers as traders expect changes to the real estate sales tax. Arms maker BAE Systems has jumped nearly 4.5% as defense shares gain after the “partial mobilisation” announced by Putin this morning.
Liz Truss to ‘cut stamp duty’ in mini budget
Today’s public finances report shows that the UK government has received £7.8 billion in stamp duty revenue so far this financial year, more than a third more than in April-August 2021. VAT receipts are up 12% this financial year (to £73.1bn), while PAYE income tax receipts are 10.7% higher (to £81.8bn). According to the Times, the government will announce plans to cut stamp duty in its mini-budget this week in a bid to boost economic growth. Liz Truss, they explain, believes that reducing stamp duty will encourage economic growth by allowing more people to move and enabling first-time buyers to get on the property ladder. Stamp duty is an evil, distortive tax. Not much should be said in its defense, other than the fact that it collects quite a bit of revenue. This could be a positive move if – and admittedly it’s a huge if – this is the start of a wider overhaul of how we tax housing in the UK. https://t.co/bvKrBDpIHk — Ben Zaranko (@BenZaranko) September 21, 2022 I have signed up to cut stamp duty or, in fact, abolish it altogether. Labor mobility tax. idk if one could only apply it to sales by second home owners or property management companies. Replace with a matching council tax increase, perhaps. — Tony Yates🇺🇦🌻 (@t0nyyates) September 21, 2022 But reducing stamp duty could simply allow sellers to charge more for their properties (as stamp duty is paid by the buyer), driving up prices… Stamp duty is a large source of income for the government, raising around £12bn a year. By reducing it, they push over the tax threshold prices and then bring the thresholds back while pretending to help first-time buyers. The next generation has no chance unless it comes from money @thetimes pic.twitter.com/m056KGUbYI — Emma Fildes (@emmafildes) September 21, 2022 Stamp duty is an economically inefficient tax, but it has always been a nice little income earner for the Treasury. Cutting it when house prices are rising strongly is strange timing and another nail in the coffin of fiscal responsibility. https://t.co/TzZv3S9Ka5 — John Hawksworth (@jhawksworth5) September 21, 2022 Updated at 08.46 BST
Germany nationalizes Uniper to prevent energy sector collapse
In Germany, the government agreed to nationalize gas importer Uniper in a historic move to prevent the collapse of its energy sector. Under today’s deal, Germany will take control of Uniper, buying the 78% stake held by Fortum — which is majority owned by the Finnish government — for about 480 million euros. Good morning from Germany, where utility Uniper is being nationalized in a Lehman moment. The German government is to become the majority shareholder of Uniper, Germany’s biggest natural gas importer, former majority shareholder Fortum has announced. Uniper shares down 92.2% from ATH pic.twitter.com/yMXummxDwG — Holger Zschaepitz (@Schuldensuehner) September 21, 2022 The Berlin government will also inject 8 billion euros into Uniper after the Düsseldorf-based utility posted billions of euros in losses after Russia cut off supplies to Europe. That left Uniper scrambling to find alternative gas supplies as prices soared as European countries scrambled to build up storage ahead of winter. The pound hit a new 37-year low against the US dollar, falling below last week’s weakest point. Sterling fell below $1,131, levels last seen in 1985, before recovering slightly. It is now down more than 16% against the dollar this year. The pound against the US dollar over the past 20 years Photo: Refinitiv The euro also weakened, while safe-haven government bonds rose, after Russian President Vladimir Putin announced a partial mobilization of forces in Russia in a national address. Putin also accused the West of planning to destroy Russia and use nuclear blackmail and said Russia would use “all means at our disposal.” Our live blog on the Ukraine war has more details: Chancellor Kwasi Kwarteng said the government was right to help families and businesses after the UK borrowed £11.8bn last month. Kwarteng said in a statement: “I am committed to reducing debt in the medium term. However, in the face of a major economic shock, it is absolutely right for the Government to act now to help families and businesses.” “Our priority is to grow the economy and improve living standards for all – with strong economic…
