Liz Truss, New UK Leader, Lays Out Energy Price Cap Plan –

It could also help determine how successfully the West will weather Russia’s efforts to use energy as a weapon against European countries that imposed sanctions on Moscow after the invasion of Ukraine. Though Britain is far less reliant on Russian energy than Germany or Italy, the structure of its energy market makes it extremely sensitive to fluctuations in the price of natural gas.

For households, the price freeze “should have a pretty quick and material impact on confidence,” which had plummeted, said James Smith, an economist at ING. It should also decrease the severity of a coming recession, he added.

While Ms. Truss’s plan will help insulate millions of households from a harsh winter, a darkening sense of crisis has already taken hold in Britain. Rapidly rising prices for food, as well as energy, and lagging wage growth are squeezing household budgets.

At the end of August, nine in 10 people said they had noticed an increase in their cost of living, according to the Office for National Statistics, which also reported signs that people had begun cutting back on grocery shopping, dining out and car journeys. Adjusted for inflation, pay in the second quarter fell at the fastest pace on record.

Across many industries, many workers in Britain have been unwilling to accept a deterioration in their living standards. Postal workers, train drivers, dockworkers and trash collectors are among those who have gone on strike in recent months to demand raises in line with inflation. Ms. Truss and her new ministers will also have to face down the threat of more walkouts by public service workers including teachers, nurses and civil servants.

National Energy Action, a charity, estimated that 6.7 million households would still be fuel poor — which means they spend more than 10 percent of their net income of energy — even after the freeze was imposed, as energy bills could still be more than double what they were about a year ago. The National Institute of Economic and Social Research, a London think tank, said that the freeze would disproportionately benefit the richest households that also had the highest energy consumption, and that the government should have introduced a variable freeze.