Policy beats no policy but will funnel cash to richer households and won’t help cut consumption
No handouts, said Liz Truss – except, it turns out, for the one that will cost £70bn, £100bn, £130bn or virtually any large number you care to think of. That’s the point about freezing average bills for 28m households at £2,500, with yet-to-be-defined support for 5.6m businesses on top: the bill can quickly become enormous. You don’t know how high wholesale prices could go; and the other variable is how long the freeze is kept in place.
Still, policy beats no policy. A blunt price cap has the virtue of simplicity. It is easily understood, knocks a few percentage points off the short-term inflation rate (which should save several billion quid in payments on index-linked government debt) and may spare corporate carnage within the hospitality sector, for instance.
