Starmer pledges to freeze fuel bills by extending windfall tax

The Opposition leader contrasted Labour’s ‘robust’ plan with the ‘internal battle’ of the Tory leadership race and ‘lame duck’ Prime Minister.

15 August 2022

Sir Keir Starmer has set out a “very strong, robust, costed plan” to stop energy bills rising over the winter – paid for in part by an extension of the windfall levy on the profits of the oil and gas companies.

The Labour leader said the £29 billion plan to address the “national emergency” would freeze the energy price cap at its current level of £1,971, saving the average household £1,000.

He contrasted Labour’s proposal with the inaction of “lame duck” Prime Minister Boris Johnson and the “internal battle” of the Tory leadership contest, increasing the pressure on contenders Liz Truss and Rishi Sunak to spell out how they would help families struggling with soaring bills.

Sir Keir told BBC Radio 5 Live on Monday: “Millions of people are already struggling with their bills, we all know that across the country and the hikes that are expected for this October … from a price cap of just under about £2,000 to £3,500 and then £4,200 and millions of people, millions of families are saying ‘I just can’t afford that’.

“We have a choice and this is really the political choice of the day. We either allow oil and gas companies to go on making huge profits which is what’s happening at the moment or we do something about it.

“We, the Labour Party, have said we’ll do something about it. We will stop those price rises and we will extend the windfall tax on the profits that the oil and gas companies didn’t expect to make. So we’ve got a very strong, robust, costed plan here which will stop those rises this autumn.”

Sir Keir added that scrapping the planned increases in the price cap would keep inflation down, seeing it peak at about 9% rather than the 13% the Bank of England is forecasting, making future interest rate rises less likely.

He criticised the Government and the Conservative leadership hopefuls, who both oppose extending the windfall tax.

Rishi Sunak and Liz Truss
Tory leadership contenders Rishi Sunak and Liz Truss (Jonathan Hordle/ITV/PA)

“We’ve got to grip it because at the moment what we’ve got is two Tory leadership candidates who are fighting each other in a sort of internal battle, where their main argument seem to be about how awful their record in Government has been and a Prime Minister who’s a lame duck because he’s acknowledged there’s a problem with energy bills, but says ‘I’m not going to do anything about it’,” he said.

However, the Institute for Fiscal Studies (IFS) questioned Labour’s explanation as to how it would fund the support package.

IFS director Paul Johnson said the party’s plan to cancel the energy price cap rise – if extended from the proposed six months to a year – would be “looking at the cost of furlough.”

He told BBC Radio 4’s Today programme that it would be “true this year” that this would bring down inflation and interest on government debt payments, but warned the average rate of inflation would not change over time assuming it was only a temporary subsidy, “so that’s not a real saving … in the long run”.

In response, Sir Keir told BBC Breakfast: “What Paul Johnson isn’t disputing is that our plan will reduce inflation…

“Of course what he’s rightly saying is what happens after April matters because you have to maintain measures to reduce inflation.”

Asked about the potential length of the freeze, he said the situation would have to be assessed in April according to the forecasts.

He argued that other measures were needed “on food etc to keep those prices down” and to insulate 19 million homes over the next decade.

The Labour leader has been under pressure to set out how his party would address the worsening cost-of-living crisis, with former prime minister Gordon Brown last week calling for an emergency budget, a price cap freeze and the temporary nationalisation of energy firms if they reject reducing bills.

Asked if he and his party should have acted sooner, Sir Keir said he had wanted a “fully costed, comprehensive plan”.

“We’ve been working on that for six or seven weeks … I’ve got a very important job as leader of the Labour Party, leader of the Opposition, but I’ve also got another job that’s really important and that is I’m a dad and I’m not going to apologise for going on holiday with my wife and kids, it’s the first time we’ve had a real holiday for about three years.”

Sir Keir Starmer
Labour leader Sir Keir Starmer has said Labour would not ‘let people pay a penny more’ on their winter fuel bills (Danny Lawson/PA)

Sir Keir rejected calls to nationalise energy firms, saying: “If you go down the nationalisation route, then money has to be spent on compensating shareholders and I think in an emergency like this, a national emergency where people are struggling to pay their bills, I think that the right choice is for every single penny to go to reducing those bills.”

The Labour leader said his party would not go ahead with the £400 rebate on energy bills which the Government has promised all households in October, saying: “We’re not going to let the price go up in the first place and so that’s how the £400 is catered for.

“Whilst we’re cancelling parts of the Government’s approach so far, the bit we’re not cancelling is the £650 to pensioners and those on Universal Credit, so that is targeted support we would keep.”

Sir Keir said Labour was also committed to measures to increase the UK’s energy security, doubling onshore and offshore wind capacity, investing in solar, tidal and hydrogen, and bringing forward new nuclear capacity.

In order to pay for the measures, Labour said it would close a “loophole” in the levy on the profits of the energy companies announced by Mr Sunak in May when he was chancellor, and backdate the start to January, which together with rising global prices would bring in £8 billion.

Labour said £14 billion would come from other measures such as dropping the £400 energy rebate, and abandoning pledges made by the Tory leadership contenders – such as halting the “green levy” on fuel bills, which Ms Truss is proposing, or scrapping VAT on domestic fuel bills which Mr Sunak has promised.

And by keeping inflation down, the party said it would reduce the Government’s debt interest payments by another £7 billion.

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