Closing summary
Ministers are to meet energy company executives on Thursday to discuss measures to tackle the rising cost of living as the UK government considers beefing up a windfall tax on their profits.
The chancellor, Nadhim Zahawi, and the business secretary, Kwasi Kwarteng, will meet gas and electricity bosses as the Treasury considers toughening the 25% levy on the profits of North Sea oil and gas operators announced in May.
Since the tax was announced, oil and gas companies have announced even larger profits than previously anticipated. Unions labelled the bumper earnings an “insult to millions” as the cost of living hits households, who are facing bills of more than £4,000 next year.
Consumers already owe energy suppliers a record £1.3bn even before bills go up further, according to research from uSwitch.
Consumer champion Martin Lewis and the bosses of Octopus Energy and Utilita have called on the government to act urgently to stop what Lewis described as a “national crisis on the scale of the pandemic”. Higher energy costs are expected to push UK inflation, currently at 9.4%, above 13% in coming months.
It’s a different picture in the US, where inflation slowed more than expected last month to 8.5% from June’s four-decade high of 9.1%, reflecting lower energy and gasoline costs, while the core rate (excluding food and energy) remained at 5.9%, rather than picking up to 6.1% as forecast.
Stocks on Wall Street have rallied and the dollar has fallen sharply as investors are betting that the US Federal Reserve may hike interest rates less aggressively, with signs that inflation has peaked.
Our other main stories today:
Thank you for joining us today. We’ll be back tomorrow. Take care – JK
Just in: The environment secretary George Eustice and environment minister Steve Double met with the CEOs of water companies this morning to discuss their response to the driest summer in more than 50 years.
Ministers heard from CEOs about how their companies are taking necessary steps to safeguard public water supplies and mitigate the effects of this exceptionally dry period.
Eustice said:
All water companies have reassured me that water supplies remain resilient across the country. Each company has a pre-agreed drought plan which they are following, and I have urged them to take any precautionary steps needed to protect essential supplies as we go into a likely very dry autumn.
We are better prepared than ever before for periods of dry weather with a system that is working well to manage water usage, protect the environment and maintain water supplies for the public and critical sectors. We will continue to actively monitor the situation, working alongside partners including the Environment Agency.
Flight disruption in the UK was the worst in Europe in recent months, according to Tui, while Manchester was the most-affected airport, as the travel operator reported a €75m (£63m) hit from air traffic chaos, writes my colleague Joanna Partridge.
“We had significant challenges and interruptions, especially on the UK side,” said Sebastian Ebel, Tui’s incoming chief executive, who will take over the top job at the start of October.
“We have never before invested so much into standby aircraft, into wet lease [short-term] capacity, into people to take the calls,” Ebel said.
He said the company had not anticipated such levels of disruption as consumer demand for foreign holidays bounced back in the spring after the lifting of coronavirus travel restrictions.
Tui blamed labour shortages for the difficulties at Manchester, and added there had also been disruption at Amsterdam airport, which is continuing.
Updated
Like others, James Knightley, chief international economist at ING, believes that the Fed could still hike interest rates by 75 basis points again at the next meeting in September:
A rare pleasant surprise from the CPI [consumer prices index] report with headline inflation dropping to 8.5% year-on-year from 9.1% on lower fuel prices, airline fares, clothing and education costs. Ongoing falls in gasoline will mean the headline rate falls further in August, but core inflation is likely to be stickier due to labour costs and will keep the Fed firmly in tightening mode.
It is important to remember that there is another jobs report and another inflation report ahead of the September 21st FOMC meeting. But inflation remains far from target, the economy has added more than half a million jobs last month and third-quarter GDP is set to rebound based on consumer movement data.
Add to all that a positive contribution from net trade and a less negative drag from inventories, then the case for a third consecutive 75bp Federal Reserve rate hike in September remains strong.
Wall Street rallies after US inflation slowdown
Wall Street has opened higher after the slowdown in US inflation.
The Dow Jones jumped 440 points, or 1.3%, to 33,214 at the opening bell, while the S&P 500 gained 70 points, or 1.7%, to 4,193 and the Nasdaq surged 293 points, or 2.4%, to 12,787.
In Europe, stock markets are also trading higher. The FTSE 100 index is up 0.2% or 16 points, at 7,505 while Germany’s Dax is 1% ahead, France’s CAC has gained 0.6% and Italy’s FTSE MiB is trading 0.8% higher.
The dollar has fallen sharply, with the pound and the euro gaining 1% against the greenback.
Investors are betting that the Fed may raise interest rates less aggressively, with signs that inflation has peaked, although it is still way above its target.
Updated
Michael Metcalfe, head of macro strategy at State Street Global Markets, said:
July’s inflation print will be more comforting for the Fed, especially the lower than expected rise in core inflation. This was partly reliant on an outsized fall in airfares and the trend in housing related and medical care inflation is still troubling. Nevertheless, this was a big improvement on June’s data and if repeated in August would take some pressure off the Fed’s September FOMC meeting.
Here’s our full story on US inflation:
Gas prices eased bringing down the annual rate of inflation to 8.5%, still close to a multi-decade high but lower than the four-decade peak it hit in June.
July’s figure, while still high, represents a significant fall from the annual rate of 9.1% recorded in June and will raise hopes that inflation has finally peaked in the US. It follows other indicators that have suggested price rises are finally moderating.
But the report showed once again how broadly inflation has spread through the economy. After stripping out food and energy costs – which are highly volatile – prices climbed by 5.9% in the year to the end of July, matching last month’s reading.
Mike Bell, global market strategist at J.P. Morgan Asset Management, echoed this.
Much will inevitably be made of the fact that US inflation appears to finally be peaking.
However, with core inflation still significantly above target, it is far too early for the Fed to declare victory and stop raising rates.
With the Atlanta Fed’s measure of wage growth now at 6.7%, core inflation is unlikely to return to anywhere near target until wage pressures moderate significantly.
With unemployment at the lowest level in over 50 years and workers demanding pay rises to try to keep up with inflation, it’s hard to see wage growth moderating by enough to return inflation to target without first seeing a rise in unemployment.
So while a peak in inflation is welcome news, it’s probably not enough to allow the Fed to ease off its tightening or to put recession fears to bed.
Mike Owens, global sales trader at Saxo Markets, has looked at the market reaction.
Initial reaction sees US dollar selling off hard down 1% vs the euro and sterling, almost 1.5% vs Japanese yen, showing how it’s caught out the market. Equity futures rally, the sign of a slowing in the rate of inflation offers hope the Federal Reserve’s rate increases won’t need to go as far as previously thought.
Both these moves may be short lived if the market returns its attention back to the Fed; one month of data won’t change their current hawkishness as it stands by its mission to force inflation down.
US stock futures rose after the data, pointing to a higher open on Wall Street in half an hour. Paul Ashworth, chief US economist at Capital Economics, said:
Consumer prices were unchanged in July and there’s a good chance that prices will fall outright in August. With core consumer prices increasing by a more modest 0.3% month-on-month last month, we still think the Fed will hike interest rates by 50bp at the upcoming meeting in September.
He has looked at the figures in detail:
Gasoline prices fell by 7.7% m/m in July and, with the crude oil price continuing to trend lower, retail gas prices are on track to fall by an even bigger 11% in August. Food prices increased by 1.1% m/m last month, extending a run of very big increases, but this is the next deflationary shoe to drop.
The surge in food at home prices has been unusually broad based, with cereal and dairy prices leading the way in July. Nevertheless, in recent weeks there has been a collapse in not just agricultural crop prices, but dairy, egg and chicken futures prices too. There is now a good chance that CPI food at home prices will be falling outright by the time the fall arrives.
And turning to core prices, excluding food and energy, they increased by a modest 0.3% month on month in July, helped by a 7.8% drop in airline fares. Clothing prices fell by 0.1%, but household furnishings prices increased by 0.6% and recreation prices increased by 0.2%.
Overall, there is little sign that retailers are discounting prices because they’ve been caught with too much inventory. IT commodity prices did decline by 0.8% m/m, however, which reflects the easing of semiconductor shortages. Semiconductor shortages look to be improving for motor vehicles too, with new vehicle prices increasing by a more modest 0.6% m/m and used vehicle prices down by 0.4%.
Cyclical price pressures remained high, with owners’ equivalent rent increasing by 0.6% and rent increasing by 0.7%. Even there, however, the alternative measures of rents point to a moderation, albeit one that won’t show up in the CPI for another few months. Overall, with headline inflation still at 8.5% and core inflation at 5.9%, this is not yet the meaningful decline in inflation the Fed is looking for. But it’s a start and we expect to see broader signs of easing price pressures over the next few months.
Updated
The bigger-than-expected slowdown in US inflation last month to 8.5%, from a 40-year high of 9.1% in June, should take some pressure off the Federal Reserve to continue aggressively hiking interest rates.
Prices were unchanged in July from the previous month, according to the US Labor Department. Energy costs fell 4.6% and gasoline prices were down 7.7%, offsetting increases in food and accommodation costs, up 1.1% and 0.5% respectively.
The drop in July’s annual inflation rate has raised hopes that US inflation may have peaked.
Good news: The monthly inflation reading was flat in July. We haven't seen anything that low in over a year. (See chart)
— Heather Long (@byHeatherLong) August 10, 2022
There's hope US inflation has peaked, though a lot will depend on gas prices. pic.twitter.com/BBfxLDCg5U
Updated
The dollar has fallen on the news, and is trading about 1% lower against both sterling and the euro.
Breaking! US #inflation falls to 8.5% in July. Monthly change 0.0%! pic.twitter.com/yg35vvwllH
— jeroen blokland (@jsblokland) August 10, 2022
US inflation slows to 8.5%
US inflation has slowed more than expected, to an annual rate of 8.5%, dropping for the first time since April. It’s down from 9.1% in June, reflecting lower energy prices.
Core inflation, which strips out volatile energy and food costs, defied expectations of a pick-up and stayed at 5.9%.
This is in stark contrast with the UK, where inflation reached a fresh 40-year high of 9.4% in June. It’s expected to rise above 13% in the coming months, alongside a recession lasting longer than a year, according to the latest Bank of England forecasts.
Updated
Nadhim Zahawi, the chancellor, has just defended the government’s decision to draw up contingency plans for power cuts this winter in the event of the UK running short of gas. He said he thought the UK would be “in a good place” in terms of energy supply.
Speaking on a visit to Belfast, Zahawi said the government was making “all sorts of contingency plans” for what might happen over the winter. He went on:
One of the reasons that I think we had one of the most successful vaccine programmes in the world is because we prepared for all sorts of scenarios.
I am very, very confident that the work we will do with the energy producers and suppliers will mean we will be in a good place.
The pound has hit a two-week low against the euro as investors worry about potential blackouts in Britain.
Sterling slipped 0.1% to €1.1818. Businesses and even consumers could face blackouts this winter under government crisis plans as concerns grow over power supplies, it emerged yesterday.
Under the government’s latest “reasonable worst case scenario”, officials believe the UK could experience blackouts for several days in January if cold weather combines with gas shortages to leave the country short of power.
Concerns are mounting over the toll on households this winter as new forecasts showed annual energy bills are forecast to top £4,200 from January, triggering a warning that Britons face “serious hardship on a massive scale” without government intervention.
In less than a quarter of an hour, we’ll be getting the latest US inflation figures, which are expected to show a slight slowdown in the inflation rate to 8.7% in July from 9.1% in June.
However, the core rate which strips out food and energy, as they tend to be volatile, is expected to pick up to 6.1% from 5.9%.
The Don’t Pay UK campaign group, which is calling on people to stop paying their energy bills from 1 October, says it has attracted more than 97,000 supporters so far. It says it will only take action if one million people sign up.
However, charities have warned people of the serious consequences of not paying their bills.
Simon Clarke, chief secretary to the Treasury, has tweeted:
🧵A quick thread on supporting people with the cost of living:
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
1/4 Of course, the Government is working up a package of cost of living support that the next Prime Minister can consider when they take office.
2/4 It is absolutely right to consider these options in the round when the new Prime Minister has taken office - rather than announce new un-costed policies, without sight of all the details of the pressures people could face, during a leadership election.
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
3/4 Lowering the tax burden doesn’t only help struggling families with the cost of living - it also boosts economic growth and will help avoid a recession. And that’s why I back Liz’s plan to reverse Rishi’s NI rise and cut green levies on energy bills.
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
4/4 @trussliz has always said that she will look at what more needs to be done. I have no doubt she will do the responsible and honest thing by considering these proposals when in office: making decisions in light of all the facts and the options. That's what leadership is about.
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
Truss refuses to rule out cash payments to help with energy bills
Liz Truss, the foreign secretary and frontrunner in the Tory leadership contest, has insisted that she is not ruling out giving cash payments to people struggling with their energy bills, reports Andrew Sparrow.
In a pooled broadcast interview, shown on Sky News, when she was asking what she would do on this issue, she restated her commitment to cutting the tax burden, by reversing the national insurance increase and removing the green levy from fuel bills, as a priority. But, when she was asked if that meant she was ruling out cash payments in any form (or targeted support, as it could be described), she replied:
That’s not what I said. What I said is my priority is making sure we’re not taking money off people and then giving it back to them later on. I believe in people keeping their own money and I believe in a low tax economy. That’s the way we’re going to drive growth.
I’m not going to announce the contents of a budget in the future at this stage in August, but I can assure people I will do all I can to make sure that energy is affordable, and that we get through this winter.
More on our UK politics live blog.
Rocketing inflation has caused a shortfall for UK government departments which need a £44bn cash boost to maintain public services such as the NHS and schools – or 40% of the planned funding increase will be wiped out, according to the Institute for Fiscal Studies.
The government will need to spend an extra £44bn over the next three years on public services to keep pace with rising inflation and avoid steep cuts.
In a review of the rising costs facing the public sector, the IFS said that without further funding, Whitehall budgets faced being overwhelmed by rising cost pressures that would force departments to cut staff and services.
The government said in its November spending review that it would increase departmental budgets by 3.3% on average above the then inflation rate. But with prices soaring since then, the tax and spending thinktank is forecasting the rise in budgets is now unlikely to be more than 1.9%.
Updated
Hungary's MOL says oil flows viz Druzhba pipeline to resume 'within days'
Oil prices have drifted lower again today. Brent crude is trading $1.22 lower at $95.08 a barrel while US light crude is down $1.18 at $89.33 a barrel.
Oil flows from Russia to central Europe via the Druzhba pipeline were suspended on 4 August after transit fee payments fell foul of sanctions against Moscow, but Hungarian energy group MOL said they could resume within days because it has transferred the transit fee for the use of the Ukrainian section of the pipeline.
The suspension drove oil prices higher yesterday. Hungary, which has been critical of EU sanctions against Moscow, said it was working on a solution. MOL said in a statement:
By assuming the fee, MOL could provide a swift solution to the issue: the Ukrainian party has pledged to resume the transport of crude oil within a matter of days, which has been halted a few days ago due to technical issues emerging on the banking front.
The suspension of pipeline flows had hit Hungary, Slovakia and the Czech Republic, whose ability to import alternative supplies by sea is limited.
Ministers will need to at least double the amount of support given last time to help protect the poorest households from rising energy bills, the consumer rights campaigner Martin Lewis said this morning.
In February, the then chancellor, Rishi Sunak, now vying for the Tory leadership, announced that eligible UK households would receive a £400 discount to help with energy bills from October, writes the Guardian’s Tobi Thomas.
Speaking on BBC Radio 4’s Today programme, Lewis said: “We’ve heard mutterings from the Rishi Sunak camp that he would increase the previous handouts that were given … but if he were to be consistent he would have to essentially double every number in that package.
“He will effectively need, if he wants to make this work, to double the numbers, especially for the poorest.”
The education secretary, James Cleverly, confirmed that crisis talks to “knock some heads together” would take place between energy sector bosses and the government this week.
The chancellor, Nadhim Zahawi, and the business secretary, Kwasi Kwarteng, will ask gas and electricity company executives to submit a breakdown of expected profits and payouts as well as investment plans for the next three years.
Lewis also criticised proposals from the other Tory leadership contender, Liz Truss, which focused on tax cuts as a way of helping the poorest households. Truss has appeared reluctant to offer further assistance for people to pay their energy bills aside from the tax cuts she has proposed, saying she does not favour “handouts”.
Ministers will need to at least double the amount of support given last time to help protect the poorest households from rising energy bills, the consumer rights campaigner Martin Lewis has said.
In February, the then chancellor, Rishi Sunak, now vying for the Tory leadership, announced that eligible UK households would receive a £400 discount to help with energy bills from October.
Speaking on BBC Radio 4’s Today programme, Lewis said: “We’ve heard mutterings from the Rishi Sunak camp that he would increase the previous handouts that were given … but if he were to be consistent he would have to essentially double every number in that package.
“He will effectively need, if he wants to make this work, to double the numbers, especially for the poorest.”
Energy bills are a “national crisis on the scale we saw in the pandemic"
— BBC Radio 4 Today (@BBCr4today) August 10, 2022
Money Saving Expert's @MartinSLewis has criticised both Liz Truss and Rishi Sunak, telling @Marthakearney their responses to the cost of living crisis "are going to leave millions destitute and in danger”. pic.twitter.com/ZPPPVjtsID
The education secretary, James Cleverly, confirmed that crisis talks to “knock some heads together” would take place between energy sector bosses and the government this week.
The chancellor, Nadhim Zahawi, and the business secretary, Kwasi Kwarteng, will ask gas and electricity company executives to submit a breakdown of expected profits and payouts as well as investment plans for the next three years.
Lewis also criticised proposals from the other Tory leadership contender, Liz Truss, which focused on tax cuts as a way of helping the poorest households. Truss has appeared reluctant to offer further assistance for people to pay their energy bills aside from the tax cuts she has proposed, saying she does not favour “handouts”.
Updated
Workers walk out in 'wildcat strike' at Grangemouth oil refinery
More strikes – this time at an oil refinery run by the chemicals company Ineos, which could have an impact on UK fuel supplies.
Around a hundred workers at the Grangemouth oil refinery in central Scotland have walked out in a ‘wildcat strike’ over a pay dispute this morning, STV News is reporting.
Maintenance and repairs staff, who are members of the Engineering Construction Industry Association (ECIA) trade union, blocked a road outside the Ineos building which is used as access for tankers getting in and out of the site after they walked out in the face of the rising cost of living.
Last year, workers at the refinery agreed to a pay rise of 5% over two years. However, with inflation expected to rise above 13% in coming months, they want to reopen the agreement and negotiate a higher offer.
The strike means that maintenance at the refinery could be paused, with production of oil and gas across the country being impacted.
The Falkirk-based refinery is owned by Petroineos, formed in 2011 between the state-owned Chinese oil giant PetroChina and Ineos, part of billionaire Jim Ratcliffe’s petrochemical empire.
Speaking to STV News last week, one worker said: “This isn’t the path we wanted to go down but we feel like we have no choice now.”
An Ineos spokesperson at the Grangemouth site said in a statement emailed to the Guardian:
We can confirm that a number of contractors employed by third parties are taking unofficial industrial action at the Ineos Grangemouth site as part of a nationwide protest event.
Our manufacturing and fuel distribution operations are unaffected. The site has a very good working relationship with the contracting companies and their employees at Grangemouth, including those operating under the NAECI [National Agreement for the Engineering Construction Industry] agreement.
We are disappointed that the protesters have chosen to use the Ineos Grangemouth site as one of their backdrops for their unofficial action today.
Updated
The Liberal Democrat Leader Ed Davey has warned that tomorrow’s meeting between government ministers and energy companies risks becoming “a pointless talking shop” unless a tougher windfall tax is confirmed.
The Liberal Democrats have put forward plans for an expanded windfall tax that could raise around £20bn, four times more than the government’s weaker levy is currently expected to generate.
Davey said:
There is no time to waste in putting in place a tougher windfall tax, so we can raise extra cash and cancel October’s energy price rise.
The Conservative government’s windfall tax has been far too soft on the energy bosses who are making eye-watering profits from this crisis whilst the British public suffer.
This meeting cannot afford to be another pointless talking shop. Families and pensioners worrying about how to pay the bills this winter need a clear plan now.
On what must be done to protect consumers from falling into debt, Jayne Gardner, Partner at Shakespeare Martineau, a debt lawyer who works with energy providers, said:
There isn’t a magic “fix-all” which can be implemented to solve the surging energy prices and the rising cost of living – energy providers, with one arm tied behind their backs, are doing what they can to help customers. Ofgem have recognised that providers have little-to-no decision making power on the price of energy, with the huge increase in the wholesale costs of energy (as a result of the Ukraine crisis) that is driving the increase in bills.
For the most part, the ball is Ofgem’s court to implement changes for the benefit of both customers and providers. One positive regulatory change being considered is to update price caps quarterly in line with current wholesale energy costs – meaning that, if wholesale prices fall, caps will be downwards and therefore passing on price reductions benefit to customers more quickly than the current six months.
Ultimately though, what the sector needs is government intervention to reduce the wholesale price of gas and electricity. The coming year will be tough, and with the October cap rise, the situation for both providers and consumers alike is likely to get worse before it gets better.
While the Treasury’s Energy Bill Support Scheme granting £400 towards energy bills for all domestic electricity customers will score political points for the Government, many will be left scratching their heads wondering why those who are financially comfortable and able to pay their bills are granted the same support as those most vulnerable, where financial support will go the furthest.
Poorly insulated homes will pay £1,000 to £2,000 more this winter than better-rated homes, according to new analysis by the Energy and Climate Intelligence Unit, a non-profit group.
With the dual fuel price cap forecast to reach £3,958 this winter, the group found homes rated band F on the Energy Performance Certificate (EPC) system, a measure of the home’s efficiency, are set to have a gas bill £968 higher than a home rated band C, the government’s target for 2035.
The average home in the UK is rated band D and these homes will pay £420 more for their gas this winter, compared to a band C home.
Wholesale gas costs are set to have added around £2,500 to energy bills during the gas crisis. This includes electricity, as high wholesale gas prices have a knock-on effect in the power market as some electricity is still generated from gas, and the current market design means that has also sets the price for some other generators.
When gas and electricity bills are taken together, those living in the worst rated homes will pay almost £2,000 extra compared to EPC band C, and the average EPC band D homes will pay almost £600 extra.
Jess Ralston, senior analyst at ECIU said:
These stark differences between highly insulated and poorly insulated homes show the real-world impacts insulation could have in time to dent exorbitant bills this winter. The most vulnerable, such as the elderly, tend to live in colder homes and these are the groups that are being placed at risk by inaction from the government on energy efficiency.
The ECO insulation scheme has worked well and is knocking at least £600 a year off the bills of fuel poor households, but government is non-committal on doing more. We have to consider security of supply too, but more UK gas won’t come online anytime soon, so insulation is our best bet to shield us from the whims of Putin and lower bills during this cost of living crisis and each year after.
EDF sues French government over price cap
EDF is suing the French government for €8.3bn (£7bn) after the president, Emmanuel Macron, forced the nuclear energy firm to sell energy at a loss.
The French government extended a price cap in January to protect consumers and businesses from the rocketing cost of energy, forcing EDF to sell power below market prices.
The 84%-state-owned company has filed a compensation claim with the Conseil d’Etat, the French administrative supreme court, over “losses incurred” as a result of the price cap.
EDF, which is in the process of being fully nationalised, said it had lost €8.3bn to date and suggested the price cap could cost it €15bn over the full year.
In addition, EDF has had to power down some sites temporarily near the Rhône and Garonne rivers as heatwaves push up river temperatures, restricting its ability to use river water to cool the plants. Under French rules, the company can’t discharge water above certain temperatures back into the rivers because this could harm wildlife.
But at the start of this week, France’s nuclear power regulator extended temporary waivers allowing five power stations to continue discharging hot water into rivers. The ASN watchdog approved a government request for the waivers introduced in mid July to be prolonged at the Bugey, Saint Alban, Tricastin, Blayais and Golfech power plants.
Half of EDF’s 56 nuclear reactors have been offline due to planned maintenance and work to repair corrosion which was delayed by the pandemic, just as Europe faces an energy crunch following Russia’s invasion of Ukraine.
As a result of the maintenance work, the French nuclear giant estimates its power output this year will be the lowest in more than three decades. The company recently reported a first-half loss of €5.3bn.
Updated
E.ON slashes value of investment in Nord Stream 1
The energy network operator E.ON has slashed the value of its investment in the Nord Stream 1 gas pipeline by about €700m (£592m), as a result of “increased uncertainties” following Russia’s invasion of Ukraine, reports my colleague Joanna Partridge.
The German utility firm had said in March that its 15.5% stake – which E.ON holds indirectly via its pension fund – had a book value of €1.2bn, so its revaluation represents a 58% decline in value.
The company Nord Stream owns and operates two pipelines that each stretch 1,224km (761 miles), to bring natural gas from Russia to Germany.
Germany halted the certification process for the controversial Nord Stream 2 pipeline in late February, days before Russia’s full invasion of its neighbour, after Moscow granted recognition to the self-proclaimed republics of Luhansk and Donetsk in east Ukraine.
E.ON’s chief executive, Leonhard Birnbaum, said: “The current energy crisis finally makes clear that Europe needs to transform its energy system. To be independent of Russian gas. To ensure supply security.”
At the release of its last annual results in March, E.ON warned of the “valuation risks for investments”, including its stake in Nord Stream 1, which is majority-owned by Russian state energy firm Gazprom.
The flow of gas to Europe through Nord Stream 1 has reduced to about 20% of the pipeline’s usual capacity in recent weeks, half the amount that had been delivered since service resumed after maintenance work.
Here’s our full story on the meeting between the chancellor and business secretary and energy company bosses tomorrow to discuss measures to tackle the rocketing cost of living. Annual energy bills are forecast to rise above £4,000 in January.
The tax cuts proposed by Liz Truss, the favourite contender to become the new prime minister, are not enough and without more support measures could “leave millions destitute and in danger this winter,” consumer champion Martin Lewis warned this morning.
A Treasury source told the Sun, which first reported news of the meeting: “If you look back at what these firms were projected to make and what they actually brought in, it was beyond their wildest expectations. We are looking at options to go further and faster on those profits.”
The government has also floated the idea of extending the tax to electricity generators, although Boris Johnson later rejected the proposal.
Updated
Lord Howard, former Conservative party leader, was also speaking on BBC Radio 4’s Today programme.
"I really do agree with Dominic Raab that the method that Liz Truss is proposing would be suicidal"
— BBC Radio 4 Today (@BBCr4today) August 10, 2022
Lord Howard, former Tory party leader, says his favoured candidate Rishi Sunak has the experience needed to address the cost of living crisis#R4Today pic.twitter.com/TBK6DGHVky
And here is the full interview with Octopus Energy boss Greg Jackson, who called on the government to double support measures aimed at helping people with rocketing energy bills.
Greg Jackson, founder of Octopus Energy, told us that with rapidly rising prices, government help on household energy bills should at least double.
— BBC Radio 4 Today (@BBCr4today) August 10, 2022
Hear the full interview with @seanfarrington for #R4Today on @BBCSoundshttps://t.co/Q5Hb63r5vW
But last night, Liz Truss said she rejects the “Gordon Brown economics” of helping people directly with bills as her rival, Rishi Sunak, warned the British people “will not forgive us” if vulnerable households do not get extra help this winter, writes our chief political correspondent Jessica Elgot.
At the latest Conservative hustings, the former chancellor said he would not be prepared to spend sums similar to the help offered earlier this year, and that support should be more targeted. He said: “I don’t think that will be necessary because what we are talking about now … is the extra increase on top of what we thought.
“It’s right that we target that on the people who most need our help.”
He also admitted that despite his 5p cut to fuel duty, people were “not feeling it at the pumps” and said further help was going to be needed for the most vulnerable.
Speaking at the hustings in Darlington, which was dominated by questions on rising energy bills, Truss said she did not believe in using further taxation to boost government help.
“The first thing we should do as Conservatives is help people have more of their own money. What I don’t support is taking money off people in tax and then giving it back to them in handouts. That to me is Gordon Brown economics.”
But Cleverly didn’t offer details of what the government might do to help households with rocketing energy bills.
Boris Johnson waded into the Tory leadership row over energy costs last night by declaring he was “absolutely certain” his successor will offer further help to households, as average annual bills are now forecast to top £4,200 by January, write the Guardian’s Rowena Mason and Alex Lawson.
Johnson made an unexpected intervention on energy bills at a No 10 reception, as Liz Truss, the frontrunner to be the next prime minister, was accused by Rishi Sunak’s campaign of being “divorced from reality” over her refusal to commit to more handouts.
Johnson has repeatedly refused to act on rocketing gas and electricity bills before leaving office on 5 September, but said he was sure the next prime minister “will be wanting to make some more announcements in September/October about what we’re going to do further to help people in the next period in December/January”.
He added: “I just want you to know that I’m absolutely confident that we will have the fiscal firepower and the headroom to continue to look after people as we’ve done throughout.”
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UK ministers to meet energy firms on Thursday
Government ministers are to meet energy companies on Thursday as the Treasury considers toughening the 25% levy on the profits of North Sea oil and gas operators announced in May.
Chancellor Nadhim Zahawi and business secretary Kwasi Kwarteng will meet energy bosses to discuss soaring energy bills for households, at a time when oil and gas companies are raking in billions of pounds in profits.
Education secretary James Cleverly, an ally of Liz Truss, told ITV’s Good Morning Britain that the chancellor and business secretary were “calling in” the leaders of the big energy companies to “knock some heads together” and “hold them to account about what they’re going to do with those profits”.
What we need to do is make sure that we have a short, medium and long term plan, so the chancellor and the business secretary are getting those energy companies in as part of the short-term response.
Households face average energy bills of more than £4,000 bills a year from January.
Speaking on BBC radio 4’s Today programme, Cleverly said in the short term, a “targeted support package for people that need help the most” is needed.
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Martin Lewis: government needs to act now to stop 'national crisis on scale to pandemic'
Consumer champion Martin Lewis, founder of moneysavingexpert.com, is on the radio now.
He said for every £100 a month that people pay on direct debit for their energy bills now, that will go up to £181 probably at the end of August, before the new prime minister is in place, and rise again to £215 in January.
Sitting down with the energy companies is the right thing to do but ultimately it is government and government alone that can make the decision to stop the terrible cataclysmic risk millions of people in our nation face this winter and it needs to do it soon.
He said with the difference in the energy price cap likely to double between April and January, the chancellor should also double all the figures in his support package.
Liz Truss, the frontrunner to become prime minister, has pledged tax cuts, but Lewis said:
Tax cuts will not help the millions of the poorest in society tax cuts will not help the millions of the poorest in society who are making the choice between heating and eating. That just will not help them because they don’t pay tax.
Tax cuts are not going to help the poorest pensioners, it’s not going to help those on universal credit. The dropping the green levy is a sticking plaster on a gaping wound. It’s £150.
By the time we get to January, some people will see their bills go from £800 to £4,200 on the same use.
This is a national crisis on the scale we saw in the pandemic.
If it’s just tax cuts and the green levy, then we’re going to leave millions destitute and in danger this winter and that cannot happen in our country.
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Octopus CEO calls on government to double support
Greg Jackson, the founder and chief executive of Octopus Energy, said the government needs to improve its offer of a £400 discount to households, a package that cost £16bn.
He told Radio 4’s Today programme:
If the £16bn package was right previously then clearly it’s not sufficient now and we need to look at a similarly significant assistance from the government for this winter.
Question: Do you think the government is on it right now?
Clearly we’re in a state of flux with the government and this needs to be the absolute top item in the intray of an incoming prime minister.
Tackling energy bills is critical to ensure people can get through this winter.
It’s counter inflationary if it’s done right.
Question: How is it counter inflationary?
If support is given on the bills through wholesale market mechanisms, then energy makes less of a contribution to inflation and that is obviously doubly beneficial. It’s going to help people through the winter when we need it and it’s going to help tackle inflation.
In an ordinary year, the energy company might spend £1.5bn on the energy it buys to supply its customers, he said. At current prices, it’s more like £9bn. “There is no company that can tackle this problem alone.”
The increases are going to be unmanageable for so many without the right support from the government and it’s beyond what any one company can do.
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Utilita boss calls for social tariff to help the poorest
Derek Lickorish, chairman of the energy supplier Utilita Energy and former chair of the government’s committee on fuel poverty, is calling for a “social tariff” funded by the Treasury to help the poorest in society. Speaking on the Today programme, he said:
The situation is absolutely dire and I am astonished that we don’t see the two political contenders for prime minister declare a unity of purpose over this issue along with the current prime minister and start sorting it out. We have to do something very profound, we have to do it quickly because all the time we’re sitting here the clock is ticking and the price of gas keeps on increasing.
When Rishi Sunak announced the last package of measures to help, the closing price of gas on 26 May was 237p a therm. The day before yesterday the price of gas closed on the market at 463p a therm. That’s gone up 90%.
The time has come to put in place a social tariff to help the poorest in society and get on with it. And if we were to get on with it now we could have it in place by 1 January and we need dramatically the help that customers need for this winter and that looks like another £800 to £1,000 and then actually fix the problem for the fuel poor and vulnerable which looks to be 10m households.
It has to be a properly funded social tariff by the Treasury. That will cause more borrowing but is essential if we are to take the stress out of it for the poorest.
Liz Truss is talking about tax cuts, but Lickorish said the 4.5m of the poorest households who earn less than £12,500 a year don’t pay any tax so would not benefit, nor would those on benefits.
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Emma from Kent was on BBC radio 4’s Today programme, talking about how she’d been trying to clear her energy debt and saying that things would become “unbearable for so many families”.
As much as I’ve paid off a fair amount so far, I’m not going to be able to clear the outstanding amount before winter comes. With the energy prices going up in October and then even more so in January this winter is going to be tough.
I was working towards a better future and hopefully not repeating the Christmases we’ve had for the past two years. Last Christmas we were averaging a food shop once every 10 weeks if we could… I was hoping that with us both working full-time we wouldn’t have to go back to a food bank. I guess never say never. It’s going to be unbearable for so many families and to be honest I’m dreading it.
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UK households’ energy debt at record high even before bill rises
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
UK households owe £1.3bn to their energy suppliers, two months before bills are set to soar by more than 80%.
The overall debt bill is already three times higher than it was a year ago, experts at Uswitch said today, and it seems likely it will grow further over the winter.
Six million homes across the UK owe an average of £206 to their energy provider, according to the uSwitch report. In April the same average debt was £188.
Normally at this time of year people build up credit to help even out heating bills during the winter months.
Th energy regulator Ofgem is expected to hike the price cap on energy bills to £3,582 a year for the average household from October, according to a new forecast. Analysts at Cornwall Insight predicted further rises, to £4,266 in January and then £4,427 from the start of April.
Justina Miltienyte, head of policy at uSwitch, said:
Energy debt has hit an all-time high with the worst possible timing, turning this winter’s energy price hike into a deeply precarious situation for many households.
This is an alarming situation, as summer is traditionally a time when households are using less power for heating, which helps bill payers to build up energy credit ahead of the winter.
Markets are waiting for the latest US inflation figures for July, out at lunchtime. We are expecting inflation to ease to 8.7% from 9.1%, largely due to recent sharp falls in gasoline and other energy prices.
However the bigger concern is around core prices, which exclude volatile items like food and energy and are expected to rise at an annual rate of 6.1%, up from 5.9%.
In Germany, final figures show that inflation eased to 7.5% in July from 7.6% in June, but remained high.
The €9 rail ticket offered for unlimited travel and the fuel discount had a downward effect on the rate, as did the removal of the EEG renewables surcharge in July, said Destatis, the German statistics office.
In China, consumer price inflation is rising at the fastest rate since July 2020, at an annual pace of 2.7% last month, pushed up by higher pork prices. Food prices rose 6.3% compared with a 2.9% uptick in June. Pork prices jumped 20.2%, reversing a 6% decline in June as production slowed.
Factory gate prices eased to a 17-month low, however, despite global cost pressures, as slower domestic construction weighed on demand for raw materials. China’s producer price index rose 4.2% year-on-year, down from 6.1% in June, according to the National Bureau of Statistics.
Producer prices fell 1.3% in July from June, the first monthly drop since January, with the biggest falls in the price of metals and petrochemicals.
This is giving Chinese policymakers room to stimulate the flagging economy, in stark contrast to central banks elsewhere that are scrambling to rein in rampant inflation with aggressive interest rate hikes even as recession looms.
The Agenda
9am BST: Italy inflation for July final (forecast: 7.9%)
1.30pm BST: US Inflation for July (forecast: 8.7%, previous: 9.1%)
5pm BST: Russia inflation for July (forecast: 15.3%)
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