Energy prices will NOT be frozen this Winter and interest rates will continue to rise

If the polls are correct, then Liz Truss will become Prime Minister of the UK on September 5th. Her policies are starting to become known and they’re probably going to consist of tax breaks, a raise in Universal Credit payments and cutting green levies on energy bills. She appears to have ruled out any price freeze on energy, which, to be honest would be an open ended bailout of the UK’s energy suppliers, probably costing around £100 billion a year. Any price freeze that included the business sector, would likely cost in the region of £300 billion a year and even Liz Truss knows that would bankrupt Britain for sure. Also, the Bank of England is likely to raise interest rates again on the 15th September. The BoE’s target appears to be around 4%, so, another 0.5% increase in September is likely which will raise the Bank Rate to 2.25% from the current 1.75%.

Liz Truss will probably name Kwasi Kwarteng as Chancellor of the Exchequer and it’s expected that he will raise income tax thresholds which had been frozen by former Chancellor Rishi Sunak. A cut in the VAT rate is also being considered and it’s likely that a 2.5% cut will be implemented. The corporation tax rise planned by Rishi Sunak may be scrapped and also the National Insurance rise is likely to be axed. Green levies on energy bills, and possibly VAT may be dropped, and this will cut dual fuel energy bills by around 7%. Universal Credit rates are likely to rise and there may also be some assistance offered to those on Working Tax Credit and Child Tax Credit. These measures will put money in the pockets of those in work and those on benefits and the cost will be around £30 billion to £50 billion. The changes implemented by the Truss Treasury will not offset the massive price increases in the energy market, but they will help a little. The fact is that people will dramatically reduce their demand for energy, and many will simply turn the heating off this Winter. Whether that will lead to excess deaths from cold, remains to be seen. Truss will also need to deal with synchronised strike action by millions of public and private sector workers. My prediction is still for a May 2023 General Election brought about by public dissatisfaction in the Government, but, who knows, Truss could surprise us all by turning out to be the right man for the job.

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