Sir Keir Starmer has said families would “not pay a penny more” on their energy bills this winter under Labour’s plans to tackle rising living costs.
The Labour leader claimed his proposals would save the average household £1,000 a year.
The package would be paid for, in part, by a big increase in tax on oil and gas company profits.
But critics said the plan would cost as much as the Covid furlough scheme and was not a long-term solution.
The government has already announced £37bn of support for hard-pressed families, but it is under pressure to do more, with bills set to rocket over the winter.
Rishi Sunak and Liz Truss – who are battling it out to be the next prime minister – have both set out what they would do, but have ruled out extending the current windfall tax on energy company profits.
Labour said its plan to stop energy bills from rising was “fully costed” and would be paid for in three ways:
- Backdating the windfall tax to January and accounting for higher oil and gas prices to raise £8bn
- Dropping the £400 energy rebate and other pledges made by Tory leadership candidates to raise £14bn
- By reducing inflation with lower energy bills, leading to a cut in government debt interest payments of £7bn
The Labour leader said freezing the energy price cap at the current level of £1,971 a year for the typical household would bring inflation down by four percentage points.
Inflation – the rate at which prices rise – hit 9.4% in June, the highest level for more than 40 years. The Bank of England has warned it could peak at more than 13% later this year.
The main reason for high inflation is soaring energy bills, driven by Russia’s invasion of Ukraine, although households have also been hit by higher petrol, diesel and food costs.
Sir Keir said he would have to “assess” the situation in April, but Labour’s plans were about helping people through the winter.
He added further measures to reduce inflation may be needed next year, and argued in the medium to long term Labour was calling for further measures to bring costs down such as insulating millions of homes.
George Godber, a fund manager investment firm Polar Capital, told the news that freezing the energy price cap would be the “the biggest relief for almost every household in the UK but especially those that are struggling”.
But he said funding it by further targeting energy companies “is a really naïve policy”.
“Unless the Labour party proposing breaking international tax law, which I doubt, we can’t go and tax the profits that BP and Shell make in a America in the same way we wouldn’t allow the US government to tax the profits they make here,” he said.
It comes as the independent Institute for Fiscal Studies (IFS) said the government would need to find £12bn simply to achieve what it was aiming to do with the £24bn package announced in May, due to soaring energy prices.
The think tank said that in May energy prices were expected to rise by 95% in 2022/23 but are now expected to rise by 141%.
Paul Johnson, director of the IFS, told the BBC Labour’s plan was a “very expensive scheme”.
“You’re looking at the cost of furlough,” he said. “Of course what it does achieve is to protect everyone entirely from the increases in energy prices so if that is what you want to achieve that is what you need to do but you do need to realise that is a very expensive thing to do.”
The idea of freezing the price cap is backed by the Liberal Democrats and the SNP.
A Treasury spokeswoman said the government had “continually taken action to help households by phasing in £37bn worth of support throughout the year”.
This includes £400 off energy bills for all UK households and an additional £650 for eight million low-income households.
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