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    Chancellor considers blanket discount on energy bills


    September 20, 2022 - MCA.

     

      Chancellor Kwasi Kwarteng could offer businesses a blanket discount on energy bills as part of this week’s mini-Budget, The Telegraph reports.

      The Treasury is examining a potential scheme in which companies will get a fixed reduction to the rate they currently pay per kilowatt hour on their bills. This would be a different mechanism to the one used for households, where the maximum that energy companies can charge is capped instead.

      A Whitehall source said a discount would be the simplest and most effective way of delivering support, but cautioned it is just one of a number of mechanisms being looked at by ministers.

      Kwarteng is preparing to set out a detailed plan to tackle the cost-of-living and inflation crisis, with help for households and companies expected to be accompanied by tax cuts.

      Liz Truss has promised that businesses will be given six months of support equivalent to the price guarantee that she has already announced for households.

      Under the support scheme for households, consumers will pay a maximum 34p per kilowatt hour for electricity and 10.3p for gas, which amounts to average bills of £2,500 compared to £3,549 if the cap was not in place. This difference is covered by a taxpayer subsidy for the energy companies.

      A similar package for businesses is far more difficult to draw up because they have individual arrangements with energy suppliers in which the price they pay can vary widely depending on their contract.

      The proposal being considered would not cap these charges, but offers a discount of a set number of pence per kilowatt hour from what the company presently pays. City analysts believe it would be easier for ministers to deliver and cost.

      Businesses have warned support may not arrive in time for next month’s renewals. No 10 has promised that payments will be backdated if the aid is delayed.

      The six-month energy bills package for companies is expected to be unveiled this week, and longer support will be available to the worst-affected businesses.

      Martin Young, analyst at Investec, said a discount on business bills would be the “most practicable” policy lever to pull.

      He said: “The business market is more difficult to cost, not least because of the absence of a reference price that the tariff cap provides in the domestic market.

      “For this reason, a pence per kilowatt hour discount for business consumption has its merits from a costing point of view, and likely easier to administer.”

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