Chancellor Nadhim Zahawi is looking at options for bailing out businesses this winter, amid concerns that thousands of smaller companies will go to the wall due to high electricity prices.
Government sources are briefing that the package of proposals being drawn up by the Treasury for the incoming prime minister should include the option of repurposing CV19 support schemes to help businesses ride out the energy crisis.
These include grants to small and medium-sized enterprises (SMEs), as well as VAT and business rates holidays to reduce their overall bills.
These were deployed during the pandemic to help firms in the hospitality, leisure and tourism sectors survive lockdowns.
However, the source told the Sunday Times that any support for SMEs would probably cost billions and be conditional on the new prime minister’s appetite for more borrowing.
Liz Truss has already pledged to cut national insurance contributions, reverse the planned increase in corporation tax and remove green levies on energy bills — in a move that economists predict will cost £30billion to £50billion to implement.
'Help households'
Meanwhile, a former chief executive of Ofgem has called on ministers to increase handouts to households to help them through the energy crisis this winter.
Dermot Nolan said: “I think the government should provide emergency support as it’s been doing with the £400 but at a higher level, mainly concentrating on vulnerable customers.”
Nolan, who left the regulator in January 2020, also pleaded for Ofgem to introduce social tariffs, where customers subsidise the bills of more vulnerable households.
His intervention comes at a crunch time for households, with the next price cap level set be announced by Ofgem this Friday. Estimates suggest it will be about £3,500, a huge increase from the existing level of £1,971.
Kwarteng to target green profits
Business Secretary Kwasi Kwarteng is preparing to intervene in the energy market in an attempt to stabilise the “crazy” profits of renewables firms, according to The Telegraph.
Around a third of wind and solar producers are on inflexible legacy contracts, which have earned them billions from the high price of electricity during the energy crisis.
Mr Kwarteng is planning to offer the firms a favourable fixed-term rate at which to sell energy to suppliers for 15 years if they agree to stop selling cheap renewables at high wholesale prices.
Ministers are under pressure from Tory MPs who argue that renewables firms have made enormous profits from the price of electricity because they can produce it at a cheaper rate.
Danny Kruger, who is among those lobbying Mr Kwarteng to end the legacy Renewable Obligation (RO) contracts, said they were “the biggest avoidable driver of inflation we have” and called on ministers to “move as fast as possible to change the rules”.