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Boris Johnson promises ‘extra cash’ for cost of living as ministers draw up plans to fix energy market

The i 12/08/2022 Hugo Gye
Boris Johnson at Broughton Airbus plant in Chester. He promised additional support amid the economic crisis (Photo: Oli Scarff/WPA Pool/Getty) © Provided by The i Boris Johnson at Broughton Airbus plant in Chester. He promised additional support amid the economic crisis (Photo: Oli Scarff/WPA Pool/Getty)

The next prime minister will have to offer “extra cash” to households, Boris Johnson has warned as ministers work on fresh plans to intervene in energy markets.

Liz Truss, the frontrunner to win the race for No 10, has ruled out further windfall taxes but privately indicated she will not scrap the existing levy on energy firms.

The economy shrinking by 0.1 per cent in the second quarter of the year – a figure confirmed today – showed the need for a “bold economic plan”, Ms Truss claimed, while Rishi Sunak insisted the possibility of recession meant fighting inflation must be the priority.

Asked whether the existing package of financial support was enough in the light of new forecasts about the cost of energy over winter, Mr Johnson said: “No, because what I’m saying what we’re doing in addition is trying to make sure that by October, by January, there is further support and what the Government will be doing, whoever is the prime minister, is making sure there is extra cash to help people.”

He has insisted it would be inappropriate for the current Government to implement new policies or spending plans before a new Conservative leader takes over from him on 6 September.

But ministers are adamant that as well as short-term subsidy, it will be necessary for the new administration to implement fresh reforms to the UK’s energy supply. A Whitehall source told i: “We are meeting with the energy companies all the time to hear what they are doing – but ultimately the solution is Government. We are doing the legwork now so that policies are ready for the next prime minister as soon as they take office.”

Britain’s GDP shrank by 0.6 per cent in June, leading to a fall in economic activity over the second quarter as a whole. The Bank of England has forecast a recession lasting more than a year as consumers cut back on spending in response to higher living costs – almost half of companies surveyed by the British Chambers of Commerce expect to see no growth in their business this year.

A spokesperson for Ms Truss’s leadership campaign said: “The latest figures that show the shrinking of the UK economy demonstrate the need for Liz’s bold economic plan, which is targeted towards mitigating the impact of these recent shocks to economic growth.

“Through cutting taxes and driving business investment, she will deliver for the hardworking people of our country and put more money in their pockets.”

Mr Sunak claimed the recession vindicated his own approach to the economy, telling Times Radio: “It’s pretty clear that the numbers show that inflation is the clear and present danger to the economy. That’s what I’ve been saying for weeks. And it’s why the next prime minister needs to have a plan to grip inflation and should make it the number-one priority.”

The ex-chancellor has promised to increase financial support to households by enough to cover the rise in energy bills if he becomes prime minister – and admitted he may have to borrow to fund it.

He hit out at Ms Truss, insisting that her plans to cut taxes would “do virtually nothing” for pensioners and the poorest households. Mr Sunak told Times Radio: “They will need direct financial support. They don’t have an easy way of increasing their incomes, they’re going to face a really difficult winter.

“And the compassionate, Conservative thing to do is to provide those people with direct assistance.”

James Smith of the Resolution Foundation think tank said: “The economy has started a difficult period on a weak footing. And with the Bank of England forecasting that inflation will rise to over 13 per cent in October, and that the economy will slip into recession in Q4, the outlook is bleak.”

Work and Pensions Secretary Thérèse Coffey, who is running Ms Truss’s leadership campaign, insisted it was right to wait until the regulator’s official announcement of how much the cap will be before making any policy decisions.

Independent energy analysts have published varying predictions of the cap’s future level based on the likely trend of global gas prices, with some forecasting a peak of £4,000 or even £5,000.

Ms Coffey told ITV: “Just like happened in May, we waited for Ofgem to come out with the formal changes on what might happen to energy prices or what would happen with the price cap.

“All the figures I have seen does not in any way suggest an average energy bill next year of £5,000, nothing near like that.”

Regulator Ofgem will announce the new level of the cap in 26 August, with the change taking effect from October.

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