Failing to act on soaring energy bills would do “enormous economic damage”, a Cabinet minister has said as the pound slipped to its weakest level against the US dollar since 1985.
The pound dropped to as low as $1.1403 on Wednesday, just as the prime minister is set to unveil a plan to freeze annual household energy bills.
Under the plan, set to be unveiled today, Truss intends to freeze annual household energy bills at around £2,500 a year.
The pound was lower than the $1.1412 seen at the outset of the Covid-19 pandemic in March 2020 and at its worst level since Truss’s hero Margaret Thatcher was in power.
But despite the market jitters, Clarke insisted that a failure to act would also cause the economy to suffer.
The levelling up secretary told Sky News: “If we fail to act, if we don’t protect the economy against the shock of the size and scale we are talking about, then there is going to be enormous damage.
“In these circumstances I think the country will say and I think markets will respect that this is the most sensible thing to do.
“The government is clear that a fiscally responsible approach sits at the heart of our plans but we cannot fail to respond to the magnitude of the moment.”
Truss has come under pressure to act after it was revealed that the energy price cap will increase to £3,549 from October, before rising further to surpass an eye-watering £5,000 next April.
Under Truss’s plan, the price freeze would be paid for by government borrowing as much as £200bn, money that ultimately will have to be paid back by taxpayers.
The Labour Party has attacked this aspect of her plan, instead calling for a further windfall tax on the excess profits of the energy giants — something Truss has ruled out.
At her first outing at prime minister’s questions yesterday, Starmer asked Truss: “She has no choice but to back an energy price freeze, but it won’t be cheap and the real choice, the political choice is who is going to pay.
“Is she really telling us that she is going to leave this vast excess profits on the table and make working people foot the bill for decades to come?
“Every single pound in excess profits she chooses not to tax is an extra pound on borrowing that working people will be forced to pay back for decades to come.”
But Truss said the UK could not “tax its way to growth”, adding: “The way we will grow our economy is by attracting investment, keeping taxes low, delivering the reforms to build projects quicker.”
Truss also said that the UK must reduce its energy dependence as part of its plan to reduce energy bills.
Clarke also hinted that the government could be prepared to lift the ban on fracking as part of its plan to control energy prices.
“If we want energy sufficiency we have to look at every source including clearly new nuclear, more renewables but we also want to look at technologies like fracking,” he said.
“We have to do so in the most sensitive possible way with community consent at the absolute heart of our policies.”
Asked whether this meant the government could not stick to its target to reach net zero carbon emissions by 2050, Clarke replied: “The net zero commitment that the government has made by 2050 is critical.
“But in the near-term we need all kinds of gas as a transition fuel and that is something the prime minister will be saying more about.”