Sir Keir Starmer has drawn up Labour’s £29bn emergency plan to stop energy bills rising over the winter – partly paid for by an extension of a windfall levy on oil and gas company profits.
The Labor leader said that under his party’s “fully funded” proposals, consumers would not pay “a penny more” for their gas and electricity over the coming months, saving the average household £1,000.
He said his plan was a direct response to a “national economic crisis” that had left millions of families across the country scared about how they would cope.
However, the Institute for Fiscal Studies (IFS) questioned Labour’s explanation of how it would fund the support package, saying some of the proposals were an “illusion”.
As well as freezing the energy price cap at the current level of £1,971 for the average household, Sir Keir said a Labor government would insulate 19 million of the coldest homes over the next decade, reducing bills further.
The party said scrapping planned increases to the price cap – which was forecast to rise to more than £3,500 in October and to more than £4,000 in January – would cut inflation by 4%, making future rate rises less likely.
It said the price freeze would mean it would not go ahead with the £400 discount on energy bills the government has promised all households in October, to cushion the impact of rising prices.
Sir Keir said Labor was also committed to measures to boost Britain’s energy security, double onshore and offshore wind capacity, invest in solar, tidal and hydrogen, and bring forward new nuclear capacity.
His intervention will increase pressure on the challengers for the Tory leadership – Liz Truss and Rishi Sunak – to explain what they will do to help families struggling with sky-high bills if they become prime minister.
Sir Keir said: “Britain’s cost of living crisis is getting worse, leaving people fearful of how they will get through the winter.
“We’ve had 12 years of Tory governments that have failed to prepare and refused to invest, leading to higher bills and making our country less safe.
– This is a national emergency. It needs strong leadership and urgent action.
“Labour’s fully funded plan will solve the problems immediately and for the future – helping people get through the winter while providing the foundations for a stronger and more secure economy.”
To pay for the measures, Labor said it would close a “loophole” in the levy on energy company profits announced by Mr Sunak in May when he was chancellor, and backdate its start to January, which, along with rising global prices, will bring in £8bn.
Labor said £14 billion would come from other measures such as scrapping the £400 energy rebate, and abandoning promises from Tory leadership candidates – such as ending the “green tax” on fuel bills, as Mrs Truss is proposing, or scrapping VAT on domestic fuel bills as Mr Sunak has promised.
And by keeping inflation down, which it said would peak at around 9% rather than the 13% the Bank of England estimates, the party said it would reduce the government’s debt interest payments by a further £7bn.
However, IFS director Paul Johnson warned that inflation would quickly pick up once the subsidies ended, meaning the cost of servicing the debt would also rise.
“It’s an illusion in the sense that it will reduce interest debt payments in the short term, but unless you maintain these kinds of subsidies permanently, it won’t reduce them in the long run. Inflation will be higher later,” he told The Daily Telegraph.
Labor also put forward a business support package with a £1 billion emergency fund to support energy-intensive industries – such as ceramics, glass and steel – as well as an increase in the business rates threshold for small businesses.
The party said it would be funded through an increase in the rate of Digital Services Tax (DST) this year, raising at least £2bn from the most profitable global tech giants.