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UK announces energy support for non-household users
Important: Gas and electricity costs for UK businesses, charities and public sector bodies are to be cut – the government has announced. BEIS says electricity prices will be capped at £211 per megawatt hour, while gas prices will be capped at £75 per MWH – according to reports overnight. Suppliers will apply the reduction automatically to all eligible non-domestic customers, BEIS adds, with the government reimbursing suppliers for the cost. The savings will apply to contracts signed from 1 April this year – and will run from 1 October to 31 March 2023. More details to come…. The devolved governments in Scotland, Wales and Northern Ireland urged the Chancellor not to pass on the cost of the energy cap to struggling families. Scotland’s deputy first minister John Swinney, Welsh finance minister Rebecca Evans and Conor Murphy, finance minister for Northern Ireland, called for an extensive and targeted support package for those hardest hit by the cost of living crisis. In a joint letter to Kwasi Kwarteng, they say the UK government should impose a windfall tax to ensure the energy sector pays the price, “rather than passing on the cost through higher borrowing”. They say: “We are deeply concerned about who will bear the brunt of these costs. “Support should be financed by targeting windfalls in the energy sector rather than passing on costs to households through higher borrowing. “Looking ahead to your upcoming budget statement, we urge you to focus efforts on those most affected, not just rely on blanket interventions that fail to recognize the scale of difficulties faced by specific households. Rebecca Evans has called for more targeted support for those affected by the cost of living crisis. Energy bills are to be capped at £2,500 for the next two years. https://t.co/DXIZorVxas — ITV Wales News (@ITVWales) September 21, 2022 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 growth and sustainable public finances to go hand in hand.” The UK borrowed almost twice as much in August as the Office for Budget Responsibility had predicted in May, notes Michal Stelmach, senior economist at KPMG UK: “Public sector borrowing stood at £11.8bn in August, down £2.6bn on last year but £5.8bn above the OBR’s forecast. This overshoot is due to higher-than-expected inflation pushing up the cost of interest on debt and the implementation of the first installment of the £650 cost-of-living payment for households on means-tested benefits which started in July. The return of large-scale borrowing under Liz Truss’s government will be “a test for bond markets”, warns Stelmach: “Since the start of the year, 10-year UK government bond yields have already risen by more than 230 basis points. The expected increase in borrowing to fund the Energy Price Guarantee, coupled with a fall in Bank of England portfolios, will be a test of whether private investors can absorb an over-sized bond issue without a further punitive rise in servicing costs. debt”. Updated at 07.42 BST
The UK government borrowed more than expected in August
Britain borrowed more than expected in August as rising inflation pushed up the UK deficit. Public sector borrowing, excluding state-owned banks, rose to £11.82bn last month, the Office for National Statistics said this morning. This was £2.6bn less than in August 2021, but £6.5bn more than in August 2019, before the pandemic, when the UK borrowed £5.3bn to balance the books . Public sector net borrowing excluding public…
