In response to the Liz Truss’ “energy price guarantee” announcement, Emily Fielder, Head of Communications at the Adam Smith Institute, said:

“Whilst a large-scale intervention to help households and businesses struggling with their unprecedentedly high energy bills is clearly necessary, it is vital that the Government does so in a way that preserves incentives for reducing demand and suitably targets those most in need of help. 

Unfortunately, capping energy prices at £2,500 does neither of these things. Freezing energy bills at a lower rate creates an artificial price signal for end users, who will have therefore have little incentive to reduce consumption, which could lead to energy rationing and blackouts this winter. This also subsidises affluent households which use more energy, while still effectively raising the energy price cap to a level which is still unmanageably high for those on very low incomes. Overall, the unpredictability of energy prices over the next two years means that this policy is also prone to ballooning to unsustainable levels. 

The Government should instead pursue a combined approach of immediate, targeted, and costed support through cash transfers and the benefits system, combined with tax cuts designed to allow people to keep more of their own money.”

In response to Liz Truss’ plans to increase domestic energy supply, Emily Fielder, Head of Communications at the Adam Smith Institute, said:

“It’s encouraging that the new government recognises, and is taking immediate action to remedy, our lack of domestic energy supply. 

By pursuing fracking and North Sea oil field exploration, along with investing in renewable and nuclear energy, the UK will be better able to withstand international energy shocks seen world-wide, which are likely to be long-term.

The emphasis on nuclear power, as a safe, clean, and sustainable energy source is particularly welcome, even if it comes decades too late.

ENDS

Notes to editors:  

For further comments or to arrange an interview, contact Emily Fielder, emily@adamsmith.org | 0758 477 8207.

The Adam Smith Institute has released a paper, In the Bleak Midwinter: How (and How Not) to Tackle the Energy Crisis, which focuses on the energy crisis and the impact on households and businesses. 

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.