ALISTAIR SMOUT and WILLIAM JAMES
BRITISH Prime Minister Liz Truss said she would set out plans to tackle soaring energy bills on Thursday but would not impose a new windfall tax on energy producers, with borrowing instead set to increase to fund the costly intervention.
Truss, appointed prime minister on Tuesday, has promised immediate action to address one of the most daunting sets of challenges for an incoming leader in post-war history, including soaring energy bills, a looming recession and industrial strife.
She chaired a meeting of her new cabinet on Wednesday before making her parliamentary debut as Conservative Party leader, going head-to-head with opposition Labour Party leader Keir Starmer in parliament’s Prime Minister’s Questions.
“I am against a windfall tax. I believe it is the wrong thing to be putting companies off investing in the United Kingdom,” Truss told lawmakers, saying she would announce more details on Thursday.
A source familiar with the situation told Reuters that Truss was considering freezing energy bills in a plan that could cost towards 100 billion pounds ($115.33 billion), surpassing the COVID-19 furlough scheme.
Former Prime Minister Boris Johnson announced a “temporary and targeted” windfall tax on energy producers in May, but Labour has said the levy should be extended.
New finance minister Kwasi Kwarteng told business leaders that borrowing would be higher in the short term to provide support for households and businesses.
“The prime minister and I are committed to taking decisive action to help the British people now while pursuing an unashamedly pro-growth agenda,” Kwarteng said.
“We need to be decisive and do things differently. That means relentlessly focusing on how we unlock business investment and grow the size of the British economy, rather than how we redistribute what’s left.”
Investors have expressed alarm at the scale of extra borrowing that the government will probably need to undertake to fund its support scheme and the tax cuts promised by Truss during her leadership campaign.
The pound sank to two-and-a-half-year lows against the dollar this month while long-dated British government debt fell on Tuesday by the most since the onset of the COVID-19 pandemic, adding to a recent slump.
Bank of England officials told lawmakers that Truss’s plans could help to slow Britain’s surging inflation, but it was too soon to say what the implications for interest rates would be.
Truss’s first parliamentary appearance as prime minister saw her lawmakers cheer her entrance, receiving loud support when she went toe-to-toe with Starmer.
Truss was chosen by Conservative members running on a low tax platform and her clash with Starmer, who asked why she would not consider extending the windfall tax to fund her energy plan, set out the ideological divide between the two leaders starkly.
“There is nothing new about a Labour leader who is calling for more tax rises. It’s the same old same old tax and spend,” she said, to cheers.