It is very worrying that the media are hinting that Liz Truss plans a £100 billion bailout of energy companies this Winter. Keir Starmer’s plan was bad enough, but, it appears that the Truss administration will ensure domestic energy bills AND business energy bills are “frozen”, probably around the current level of £1,976. Of course, many people will welcome this, but, the problems start in April 2023 when Ofgem’s Energy Price Cap goes over £6,000 a year (£1 a KWh for electric and 27p per KWh for gas). Will Liz Truss actually remove the energy price freeze measures which will mean immediate, average energy price rises of over 400%?
There, is the problem. Once we start down this road, it’s very difficult to take away the “vital” support. And, it’s not like the UK is awash with taxpayer, or investor cash to splash around. Every penny of support will need to be raised under Quantitative Easing (QE) programs whereby the Bank of England is empowered to conjure money out of thin air. This happened during the pandemic lockdowns and resulted in rising inflation. More QE equals more inflation. Liz Truss actually believes that the UK’s energy problems can be solved by quickly ramping up supplies of gas by fracking and drilling in the North Sea. Obviously, she is more intelligent than I am, but, I doubt that our energy problems can be solved on the supply side. It is demand that needs to be addressed. Freezing prices does not lower demand by the way.
I’m currently reading about Weimar Germany where inflation rose to trillions of percent. This was down to printing money to finance World War One, the idea being that when Germany won, the defeated nations would pay down the massive debt. That didn’t happen and Germany ended up, not only with the debt from printing money, but also huge debts from the severe reparations imposed by the Versailles Treaty. I doubt that Liz Truss will succeed with her plan to subsidise the economy until the gas cavalry arrive. I do believe however, that she will succeed in raising inflation to levels not seen in the UK. So, you need to start prepping now, before everyone twigs on that the political class are simply picking over the bones of our long dead economy.