Tax The Energy Firms Or Risk Saddling Britons With Debt For Decades, Truss Warned

Sterling plunged to its lowest level against the dollar in 37 years last night as experts warned Liz Truss's plan to ease the cost of living crisis without taxing energy firms could saddle Britons with debt for decades.

- Andrew Woodcock

Markets appeared to be rattled by the new prime minister's decision to borrow to pay the £100bn-plus needed to keep lights and heating on this winter.

Low-pay think tank the Resolution Foundation warned the eventual cost of the energy crisis could even outstrip the £137bn bailout of banks following the 2008 financial crash.

The PM's plan, which she will unveil in a statement to the Commons today, will freeze average bills at a level of around £2,500 by setting a cap on the price of a unit of energy, with anything above paid by the government.

Ministers have rejected an industry proposal for the state to underwrite bank loans to energy suppliers to cover the gap between the cap and the sky-high market price.

But Ms Truss came under intense fire at Prime Minister's Questions when she flatly rejected the alternative of extending the £5bn windfall tax imposed by Rishi Sunak earlier this year.

Labour accused Ms Truss of making working people foot the bill while allowing energy firms to keep reaping huge profits during the cost of living crisis.

"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," said Sir Keir Starmer. "Families and public services need every penny they can get. How on earth does she think now is the right time to protect Shell's profits?"

The SNP's Westminster leader Ian Blackford branded the plan a "Truss tax" amounting to "a decade-long raid on the bank accounts of ordinary taxpayers".

As sterling slid to a 37-year-low just above $1.14, new chancellor Kwasi Kwarteng met with City financiers and Bank of England governor Andrew Bailey to reassure them about the government's economic strategy.