MNI BRIEF: UK Energy Support to Cost GBP60 Bln: Kwarteng

The estimated cost of the UK's Energy Price Guarantee is GBP60 billion for the next six months, Chancellor of the Exchequer Kwasi Kwarteng said Friday as he delivered a fiscal package including tax cuts to parliament. The EPG is set to run for two years, with a unit price cap limiting the typical annual household bill to GBP2,500 per year, so the GBP60 billion ticket may only be a fraction of the total cost, although costs hinge on the difference between future wholesale prices and the level of the cap and could vary wildly.

He also announced that next year’s planned increase in Corporation Tax will be cancelled, at an estimated cost of GBP19 billion.

Kwarteng sought to provide some reassurance to markets worried about the government's economic policy, with no official Office for Budget Responsibility forecasts accompanying the latest slew of spending announcements. The Chancellor said the Treasury estimates of costs would be given to the OBR and he stressed that they would leave Bank of England independence untouched. The government "considers their independence to be sacrosanct," Kwarteng said of the BOE, adding that he and Bank Governor Andrew Bailey were meeting twice weekly.

Gilt sales will increase by GBP63 billion in the next 6 months, skewed to the short-end, with the curve seen flattening in response.