The new prime minister’s plan for tackling the energy crisis should include five measures

Editorial: The country is in desperate need of a government that is more competent in its energy support – and indeed in its wider policies on social and economic matters

People will do their best, but politicians must take the lead (BBC/AFP/Getty)

There has to be a plan to deal with the UK’s soaring energy bills and the country will get one within the next few days. That much has been made clear by Liz Truss, frontrunner for the job of prime minister, in her BBC interview with Laura Kuenssberg on Sunday.

The measures will cost taxpayers a huge amount, up to an estimated £100bn, but the alternative modest help that has so far been offered is quite inadequate. The costs of not doing enough are far greater than the costs of such radical action.

However, the sheer scale of the support needed means that it is all the more important that the schemes should be wisely constructed. The country has recent experience of supporting the economy, at a massive cost, through the pandemic. It is clear now that there was huge waste at many levels.

The Public Accounts Committee (PAC) reported in May that billions had been lost to fraud and error. The government needs to learn from its mistakes, as the PAC urged it to do. The new prime minister and cabinet face a test of their will, but also of their competence. It is reasonable that Liz Truss should not give specifics in advance of her announcement. But it is clear that there are at least elements that absolutely need to be part of the package.

First and foremost, there has to be more support for poorer and less advantaged people. The mechanisms to provide such help already exist in the social security system, including winter fuel allowances. The challenge is to use these but also fund ways of supporting families that are flexible to their needs.

Next, there has to be support for the business community, particularly small and medium-sized enterprises. Large companies that use a lot of energy have had the option of hedging their costs. This is not open to smaller ones. Yet 61 per cent of UK private sector employment is in these SMEs. What is at risk is not simply the companies themselves; it is the jobs they provide. There has to be targeted support, learning from the mistakes made when the government gave help to businesses during the pandemic.

Thirdly, the government must be aware of the need to hold down the headline consumer price index, for increases in the CPI have a knock-on impact on the costs of servicing the index-linked portion of the national debt, on wage negotiations, and on long-term interest rates.

Measures that hold down overall energy prices reduce inflation; measures to help people cope with high energy prices do not. The current energy support scheme has been ruled by the ONS as a transfer paid by the government, which means that the full costs of higher energy prices are shown in the CPI – even though most households will not be paying these costs in their entirety.

This is a reasonable decision, but the government needs to take this into account in future support. Energy costs must be held down, and the burden of doing so should be shared between the energy companies and the taxpayer.

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Fourthly, the government must look to the longer-term energy security of the country. The UK is fortunate in that 40 per cent of its natural gas is produced domestically, and it was actually a net exporter of oil in 2020 when domestic demand fell as a consequence of the pandemic. There should be no conflict between the country’s longer-term commitment to net zero with the more immediate objective of having more secure energy supplies.

Finally, energy conservation is more important than ever. It matters, of course, for sound environmental reasons but it also matters for security. If the country cannot reliably increase energy supplies, it must reliably reduce its demand. This is a matter for individuals, for families, for businesses large and small, and for the government itself.

People will do their best, but politicians must take the lead. This is not a matter of rationing energy, though that may be necessary. It is a matter of common sense. The country is in desperate need of a government that is more competent in its energy support – and indeed in its wider policies on social and economic matters. If this new government cannot supply competence, another will take its place.