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The bigger problem is the energy-price guarantee that Truss has announced that will put a ceiling on fuel price for consumers, with the difference born by the U

The bigger problem is the energy-price guarantee that Truss has announced that will put a ceiling on fuel price for consumers, with the difference born by the UK treasury - estimated outflow is more than 100 Billion pounds. This outflow is planned to be funded by borrowing, which has resulted in a weaker pound.

afavour 4y ago
I’m not sure that’s a bigger problem, it was announced some time ago without significant market movement. Seems the trigger is faith in new leadership or lack thereof.
Someone 4y ago
Adding nuance: it’s not that they put a price cap on energy prices (many countries in Europe do that), but the amount of money allocated to it. Reading https://www.bruegel.org/dataset/national-policies-shield-consumers-rising-energy-prices https://www.bruegel.org/dataset/national-policies-shield-con..., the UK allocates about double of what France, Italy and Germany allocate to it.
- notahacker 4y ago
  Further nuance: the UK government also ruled out trying to regain some of that expenditure on energy subsidies by increasing taxes on relevant energy company profits. And whilst the fiscal impact of the top rate tax cut (or indeed not introducing energy company windfall taxes) may not have been that huge relative to the energy subsidy, the signal sent by the the triumphal announcements that borrowing to cut taxes would solve problems was that the government wasn't just making emergency funds available to resolve a crisis, but has ceased to care about balancing their budget or inflation and doesn't really know what it's doing.
hcayless 4y ago
They really had no choice about that part. The spike (beyond their control) in energy prices was set to bankrupt hundreds or even thousands of small businesses and put many people in a situation of deciding between heat and food. The tax breaks though, were totally an own goal.
- IshKebab 4y ago
  They could have funded it by windfall taxes rather than borrowing.
  - colinmhayes 4y ago
    No they couldn't have. The electricity companies aren't really making more money than normal, they're paying insane rates to import fossil fuels.
    - IshKebab 4y ago
      Energy suppliers are just middlemen and are making huge losses due to the price caps, but energy generators are making loads of money. (At least in operating profit; some - but not all - have had huge losses from writing off their Russian operations.)
    - olddustytrail 4y ago
      Yes, they really could. We're not talking about your energy supplier company, we're talking about electricity producers and fuel suppliers (oil and gas companies). Different set of companies and they are indeed raking it in.
- pwinnski 4y ago
  > They really had no choice about that part. Hello from Texas, where electricity providers are free to pass on absurdly-high energy prices to customers, regardless of whether those people can afford to eat or not.
- janef0421 4y ago
  It is not beyond their control. Britain has significant amounts of gas production capacity, and they could thus pass emergency legislation to reduce the price. For instance, they could insulate the domestic market from foreign buyers by implementing export controls.

afavour 4y ago

I’m not sure that’s a bigger problem, it was announced some time ago without significant market movement. Seems the trigger is faith in new leadership or lack thereof.

Someone 4y ago

Adding nuance: it’s not that they put a price cap on energy prices (many countries in Europe do that), but the amount of money allocated to it. Reading https://www.bruegel.org/dataset/national-policies-shield-consumers-rising-energy-prices https://www.bruegel.org/dataset/national-policies-shield-con..., the UK allocates about double of what France, Italy and Germany allocate to it.

notahacker 4y ago
Further nuance: the UK government also ruled out trying to regain some of that expenditure on energy subsidies by increasing taxes on relevant energy company profits. And whilst the fiscal impact of the top rate tax cut (or indeed not introducing energy company windfall taxes) may not have been that huge relative to the energy subsidy, the signal sent by the the triumphal announcements that borrowing to cut taxes would solve problems was that the government wasn't just making emergency funds available to resolve a crisis, but has ceased to care about balancing their budget or inflation and doesn't really know what it's doing.

hcayless 4y ago

They really had no choice about that part. The spike (beyond their control) in energy prices was set to bankrupt hundreds or even thousands of small businesses and put many people in a situation of deciding between heat and food. The tax breaks though, were totally an own goal.

IshKebab 4y ago
They could have funded it by windfall taxes rather than borrowing.
- colinmhayes 4y ago
  No they couldn't have. The electricity companies aren't really making more money than normal, they're paying insane rates to import fossil fuels.
  - IshKebab 4y ago
    Energy suppliers are just middlemen and are making huge losses due to the price caps, but energy generators are making loads of money. (At least in operating profit; some - but not all - have had huge losses from writing off their Russian operations.)
  - olddustytrail 4y ago
    Yes, they really could. We're not talking about your energy supplier company, we're talking about electricity producers and fuel suppliers (oil and gas companies). Different set of companies and they are indeed raking it in.
pwinnski 4y ago
> They really had no choice about that part. Hello from Texas, where electricity providers are free to pass on absurdly-high energy prices to customers, regardless of whether those people can afford to eat or not.
janef0421 4y ago
It is not beyond their control. Britain has significant amounts of gas production capacity, and they could thus pass emergency legislation to reduce the price. For instance, they could insulate the domestic market from foreign buyers by implementing export controls.