Good morning. Very few prime ministers have faced a defining moment as early in their premiership as Liz Truss does today. But Truss’ announcement of her energy bills plan is not only, or even primarily, important for her: after months of uncertainty and anxiety, it will finally set out the protection available to millions of British people as they face the most ominous global economic headwinds in a generation.
Yesterday, the pound fell to its weakest level against the dollar since 1985 as markets digested the scale of the challenge ahead. Today, Truss will explain how her plan will work, and make the case that it is a comprehensive offer to keep the lights on, blunt inflation, and provide a platform for a national economic resurgence.
Her critics view it as a package that loads voters with the costs of a crisis they did not create, fails to prioritise the most vulnerable, and increases the risk of blackouts – or argue that she has abandoned the small-state principles that led Conservatives to make her prime minister just three days ago.
Today’s newsletter, with the Guardian’s energy correspondent Alex Lawson, explains what we already know about the Truss plan – and what we still need to know to make sense of the moment that could make or break her premiership. Here are the headlines.
Five big stories
Northern Ireland | Joe Biden’s administration in the US has sent Liz Truss a message on her second day in office warning against “efforts to undo the Northern Ireland protocol”. Spokesperson Karine Jean-Pierre suggested overriding the protocol would be “not conducive to a trade deal”.
Ukraine | Ukraine has launched a surprise counterattack in the north-east Kharkiv region, stretching Russian forces also facing attacks in the south. Analysts have said that the initial target could be the city of Kupyansk, a key road hub for Russian supplies.
Crime | Former footballer Ryan Giggs will face a retrial next July over alleged coercive and controlling behaviour and assault against his former girlfriend, after jurors were unable to reach verdicts last week.
Canada | The fugitive wanted over a mass stabbing that killed 10 people has died after his arrest, with sources saying Myles Sanderson’s death was the result of self-inflicted wounds. His brother, Damien, also initially a suspect, was found dead on Monday. His injuries were not self-inflicted.
Hate crime | Hateful tweets multiply dramatically as temperatures become more extreme, an analysis of 4bn geo-located posts in the US has found. Scientists logged rises of up to 22% in racist, misogynist and homophobic messages when temperatures rose above 42C.
In depth: What we do and don’t know so far about the new prime minister’s plan
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What we know
The broad shape of the plan. While ministers have studiously deferred to Truss’s announcement later today when asked about it, the headline is pretty clear from endless briefing over the last few days: a freeze to the energy price cap at about £2,500 a year. A one-off £400 discount already announced will remain in place on top of that. Ministers – rather than Ofgem – will set the price paid by the public, and it will apply to everyone regardless of their means. The government will make up the shortfall to energy suppliers still paying a steep market rate for gas.
“They seem to have settled on that figure,” Alex says. “You always have to remember that the word ‘cap’ is pretty misleading – £2,500 is an average bill: it’s a cap on the amount per unit of energy used, so your overall bill could still be a lot higher [depending on your usage]. But undoubtedly it’s a massive intervention.”
It will be funded through government borrowing. An alternative scheme proposed by the energy industry (and thought to have been hammered out with senior Treasury officials) would have seen the energy companies fund the intervention through loans guaranteed by the government, and then repaid over 10 to 20 years by a long-term rise in energy bills.
Meanwhile, Labour has proposed using windfall taxes to cover some of the costs (though they would only run to a fraction of the whole). Truss – who promised no new taxes during her campaign – has settled on funding the package through government borrowing (although an existing windfall tax worth about £5bn a year will not be cancelled). Officials anticipate that the full package of support on offer from the government could add as much as 10% to the UK’s £2.3tn national debt, Bloomberg reported.
“It was a real surprise to see [the new chancellor] Kwasi Kwarteng talking about fiscal loosening this week – that was the opposite of what the Treasury and energy companies had been discussing,” says Alex. “And the cost of borrowing is going up [as interest rates increase] – so this is going to get more expensive to pay back.”
There will also be a package of support for businesses. Companies are not protected by the energy price cap and face even bigger rises to bills without an intervention. But the exact nature of that support appears to be still under consideration within Downing Street.
It will bring inflation down. By its nature, it’s difficult to know the exact extent of this impact – but “the consensus is that it will bring inflation down from what it would have been otherwise”, Alex says. Economists at HSBC and Barclays both sent notes to clients this week saying that the impact may even mean that inflation has already peaked. The research consultancy Capital Economics called the package an “effective but expensive sticking plaster”, and said that it could significantly soften the coming recession because consumers will have more spending money.
Inflation will still be higher than we were used to before the last year: “There are lots of other pressures beyond energy,” says Alex. But given recent warnings that inflation could hit 22% next year, keeping it below 11% or 12% is a significant difference.
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What we don’t know
How much it will cost. All kinds of figures have been flying about for the overall size of the package: it’s £90bn, £100bn, £130bn, or £170bn, depending on who you ask and what you include. “They must be using the world’s biggest fag packet to write this on the back of,” says Alex. That’s not necessarily an indication of governmental (or indeed journalistic) incompetence, though: “They cannot pretend to know what that final number is, because it’s related to the wholesale gas price and we don’t know where that will be.” But it’s also because we don’t know …
How long it will last. And we don’t know how often the government will review the scheme – only that Truss wants to provide “certainty” for consumers, which would seem to suggest it will be in place for a while. “When you ask people in the industry, they say: if we do it for four months, what’s the point?” Alex says. “You’re not even fully out of winter by then.” Kwarteng did suggest in an FT piece earlier this week that “decisive action is needed to get families and businesses through this winter and the next” – but other briefing has suggested that the package for businesses may only cover this winter.
Ultimately, the key driver of gas prices won’t be the British government’s actions – it will be the war in Ukraine. “You cannot delink the two – and you can’t know when and whether there are ultimately going to be discussions with Russia.”
How it will affect demand – and whether there could be rationing. To Alex, this is a central concern about the proposal: “Clearly, for a lot of people, £2,500 is already a level of spending where they’re going to be watching their energy usage and rationing it. But there will also be people who look at £2,500 and say, I can handle that. You’re effectively switching off the signal that tells people to be careful with it.”
While Truss has said unequivocally that there will be no rationing of energy this winter, that appears premature. To state the obvious: gas is expensive because it is scarce. “If you don’t have rationing then you will potentially have shortages and blackouts,” Alex says. “We’ve seen reports of leaked documents setting out a reasonable worst-case scenario of four days of emergency measures in January. The industry is certainly concerned about it.”
How support will be targeted. We know that the central measure will not be targeted – and richer households ultimately benefit more than the worst off because they use the most energy.
Despite the obvious downsides to that mechanism, proponents of the universal approach view it as the most efficient way to reach people in the current emergency, and avoids anyone falling through the cracks. But there is the possibility, says Alex, that Truss will announce “an additional layer of targeted support for the most vulnerable”. The average energy cost annually for households was £1,339 in 2021 – even with a £2,500 cap in place, bills will be nearly double last winter.
For business, the expectation is that Truss will want to heavily focus support on smaller players. The politics of helping pubs and fish and chip shops is a lot easier than the politics of helping multinationals. At the same time, says Alex, “that shouldn’t be underestimated either – the price of your beans could well go up if Tesco’s energy bill goes up”.
If all of the above is making you hyper-aware of how much more you’re having to think about gas prices than you ever have before, you’re definitely not alone. “The average person knows far, far more than they used to about how energy comes to them and how the whole industry works,” Alex says. “And when they see it in its current form, they probably realise that it’s broken.”
We want to hear from you
Will Truss’s price cap go far enough to help you through the winter?
Reply to this email or get in touch at first.edition@theguardian.com
What else we’ve been reading
In 1972, two African American athletes were banned from the Olympics after sharing a podium together (pictured above) and refusing to engage with the American national anthem. Jules Boykoff argues that it’s time the IOC apologises to these men and make long-overdue amends. Nimo
I loved this sprawling conversation between Coco Khan and food writer Jonathan Nunn about his new book, London Feeds Itself. Sat in a Chinese restaurant, the two discuss London’s overlooked eateries and the impact of the city’s social and economic landscape on its food. Nimo
Might Samantha Morton go into politics one day? The prospect is dangled tantalisingly in this excellent interview by Emine Saner. Morton also reflects on her troubled life in care as a child: “The older I get, the more the little Sam is almost something in the distance.” Archie
Nirvi Shah looks at the growing use of voucher programmes in the US school system, which use taxpayer money to help families afford private schools. Shah explains how it excaberates inequality by moving money away from struggling public schools. Nimo
In the New York Times, Kojo Karam writes that Liz Truss is less the inheritor of Margaret Thatcher than she is of Enoch Powell, “Britain’s first neoliberal politician”. It’s driven parts of the British media mad on a Joe Lycett level. You should read it. Archie
Sport
Football | Chelsea sacked manager Thomas Tuchel less than a day after their Champions League defeat at Dinamo Zagreb and a disappointing start to the Premier League. Brighton manager Graham Potter is an early favourite to replace the German.
Football | In the Champions League, Liverpool were humiliated by a vibrant Napoli side (pictured above) in a 4-1 defeat. Meanwhile, Tottenham Hotspur beat Marseille 2-0 through two Richarlison goals and Rangers lost 4-0 to Ajax.
Tennis | Top seed Iga Swiatek saw off Jessica Pegula to reach her first US Open semi-final. Swiatek won 6-3, 7-6 (4) and will face No 6 seed Aryna Sabalenka in the last four on Thursday.
The front pages
Our Guardian print edition splashes this morning with “Truss banks on energy bill freeze in bid to unite party”. The Mirror gives itself the credit: “About Time! PM Truss bows to Mirror’s demand for bills freeze on first day in office … but refuses to make energy firms pay”. The i has “Truss reveals energy gamble – as pound hits 1985 low” while the Telegraph says “Truss vows ‘never again’ on energy bills” – the PM wants to “revolutionise” supply. The Daily Mail hails “Liz’s energy revolution” – and says that as well as the bill freeze, the Truss government will “launch new dash for North Sea gas … and restart fracking”. The Times’ lead headline is “£150bn scheme to freeze energy bills for two years”. “I’ll prove I’m a woman of action” – the Express says Truss has a “cost of living rescue plan”.
There’s some much-needed perspective in the Financial Times: “Pound slides as markets shudder at scale of challenge facing Truss”. The Sun leads with “The 3 aaahs” as the Cambridge children start their first day at the same school. And Metro has a full-width picture of the family trooping towards school while its lead story is about the “Dating app murderer” Jack Sepple, 23, pleading guilty.
Today in Focus
Liz Truss: the first 48 hours
Liz Truss has had a frantic first 48 hours as prime minister, says political correspondent Aubrey Allegretti, including a brutal cabinet reshuffle and a first battle with Keir Starmer at PMQs
Cartoon of the day | Steve Bell
The Upside
A bit of good news to remind you that the world’s not all bad
When he was 33, Les Milne’s wife, Joy, noticed he smelled different. What she would come to find out is that her hypersensitivity to smell was detecting Parkinson’s, which Les would get diagnosed with 12 years later. Upon hearing about her theory, scientists decided to research what it was that Joy could smell, and whether this could be used to identify people with the disease. After several years of working with Joy, researchers have made a breakthrough by developing a test that can identify people with Parkinson’s disease by running a cotton bud across the back of the neck.
As of now the main way to diagnose people is through symptoms, and patients’ medical histories – because diagnosis can be so late, people are often already suffering from a high degree of neurological damage. If the tests are as successful in hospitals as they have been in labs it could mean significantly earlier diagnoses which would lead to a better quality of life.
Sign up here for a weekly roundup of The Upside, sent to you every Sunday
Bored at work?
And finally, the Guardian’s crosswords to keep you entertained throughout the day – with plenty more on the Guardian’s Puzzles app for iOS and Android. Until tomorrow.
