Britain's New PM to Lift Fracking Ban, Cap Energy Prices

Britain's new Prime Minister Liz Truss announced Thursday that her Conservative government will lift a ban on fracking, approve more North Sea oil drilling, and cap domestic energy prices for homes and businesses to ease a cost-of-living crisis that has left residents across the U.K. facing a bleak winter.

The moves are a huge government intervention in the economy by Truss, who sees herself as a small-state, free-market conservative. She says she favors tax cuts over handouts, but she has been forced to act by the scale of the crisis.

"We are supporting this country through this winter and next and tackling the root causes of high prices so we are never in the same position again," Truss told lawmakers in the House of Commons.

Truss said the two-year "energy price guarantee" means average household bills for heating and electricity will be no more than 2,500 pounds ($2,872) a year.

Bills had been due to rise to 3,500 pounds ($4,000) a year beginning in October, an 80% jump from the current average annual bill of 1,971 pounds. Energy costs are skyrocketing because of Russia's invasion of Ukraine, at a time when many people and businesses are still reeling from the economic aftershocks of COVID-19 and Brexit.

Business and public institutions like hospitals and schools will also get support, but for six months rather than two years.

The government says the cap will cut the U.K.'s soaring inflation rate by 4 to 5 percentage points. Inflation hit 10.1% in July and has been forecast to rise to 13% before the end of the year.

The British government hasn't said how much the price cap will cost, but estimates have put it at over 100 billion pounds ($116 billion). Truss has rejected opposition calls to impose a windfall tax on oil companies' profits. The cap will be paid for out of Treasury funds and by borrowing.

The opposition Labour Party says that means British taxpayers will have to foot the bill.

Truss said she would issue more than 100 new licenses for North Sea drilling and end a ban on fracking in Britain. Both measures will be condemned by environmentalists, who worry Truss may backtrack on the U.K.'s legally binding commitment to reduce carbon emissions to net zero by 2050.

Britain suspended fracking in November 2019, saying it wasn't possible to accurately predict tremors associated with the drilling.

Truss says she supports the net zero commitment to fighting climate change but that it should not come at a huge cost to people and businesses.