John Swinney welcomed the business energy cap but warned it may not be enough (Fraser Bremner)
21 September 2022

John Swinney: Energy support scheme for businesses may be ‘inadequate’

21 September 2022

The UK’s new support scheme for business energy bills may be “inadequate” without reform of the energy market, Scotland’s Deputy First Minister John Swinney has said.

He responded to UK Energy Secretary Jacob Rees-Mogg’s plans to slash the cost of wholesale gas and electricity for non-domestic customers for six months from October.

The UK Government cap will mean the “supported wholesale price” will be £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas – about half the projected price on the open market and equivalent to the scheme in place for households.

Businesses who agreed fixed-term contracts on or after April 1 of this year will see the wholesale part of their bill capped automatically.

A review will take place in three months that will look at support to be made available after March, which the Government said will focus on “the most vulnerable non-domestic customers and how the Government will continue assisting them with energy costs”.

Mr Swinney said: “Energy policy is reserved to the UK Government and we have been calling for it to introduce a business energy cap for some time.

“I welcome that it has now done so, but without substantial reform to the energy market there is a real risk that this temporary measure will prove to be inadequate.

“Given the increased cost of borrowing this support must be funded, in part, by targeting windfall gains in the energy sector.”

He called for changes to the current approach on electricity transmission charging, adding: “The UK Government also needs to match the more generous levels of support provided by EU countries such as Germany.

“The powers and resources needed to tackle the cost of living emergency on the scale required: access to borrowing, welfare, VAT on fuel, taxation of windfall profits, regulation of the energy market; lie with the UK Government and we have continually urged it to use all the powers at its disposal.

“We will continue to do everything within our resources and powers to help those most affected.”

Earlier, Scottish Chambers of Commerce chief executive Liz Cameron welcomed the scheme but raised concerns that energy prices could spike after March and put companies at risk, as well as calling for clarity on who will be able to access support after the deadline.

She said: “For those firms that will benefit, the six-month cap is not enough for them to be sufficiently reassured that the problem won’t return when the cap is no longer in effect.

“We are concerned that even more sudden rises in energy bills will await firms once the cap is lifted.

“We would urge the UK Government to engage immediately with the business community to properly define the vulnerable industries cited for support after the original six-month cap.”

Business leaders say they fear bills could still surge when the scheme ends in March (PA) (PA Wire)

The body also raised concerns that other costs outside of the wholesale price, such as network charges or operating costs, could be increased and impact businesses, which the spokeswoman said is “clearly not sustainable”.

Meanwhile, Scottish Secretary Alister Jack said the scheme will “give much-needed certainty to Scottish businesses, schools, hospitals and other public services and is being introduced as a matter of urgency as we move into winter”.

He added: “This comes on top of the Prime Minister’s monumental intervention for domestic customers, saving the average household £1,000 per year on fuel bills, and in addition to the £37 billion package of support announced earlier this year.

“The UK Government is also taking vital steps to strengthen our energy security.

“The UK Treasury was able to give support to people up and down the country when we faced Covid and its strength is proving vital again as we continue to tackle the rising cost of living.”

Scottish Conservative finance spokeswoman Liz Smith said the announcement provides a necessary “furlough-level intervention”.

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