Labour’s energy policy: what is party’s cost of living plan, and what has Keir Starmer said about price cap?

The leader of the Labour Party has said the £29billion energy plan will save the average family £1,000.
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Sir Keir Starmer has unveiled Labour’s £29billion plan to tackle skyrocketing energy bills and ease the cost of living crisis.

The Labour Party’s energy policy sets out plans to freeze the energy price cap at its current rate, with Sir Keir pledging people would not “pay a penny more” on gas and electricity bills this winter.

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Experts have warned that the price cap, which currently sits at £1,971, could rise to approximately £3,500 in October and more than £4,200 in January.

According to Labour, this will be primarily paid for through a windfall tax - which would see an extra tariff imposed on energy giants who have seen huge profits following the cost of living crisis.

Sir Keir Starmer has unveiled Labour’s plans to combat energy price rises. Credit: NWSir Keir Starmer has unveiled Labour’s plans to combat energy price rises. Credit: NW
Sir Keir Starmer has unveiled Labour’s plans to combat energy price rises. Credit: NW

A windfall tax was introduced in May by then-Chancellor Rishi Sunak, but Labour has said amendments need to be made.

However, some economic experts have criticised the plan, claiming inflation will be even higher once the subsidies are lifted.

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So what exactly has the Labour Party promised, what did Sir Keir Starmer say, and what has the response been?

What is in the Labour Party’s energy plan?

Labour’s “emergency package” to help ease the cost of living crisis outlines plans to keep the energy price cap at the current level throughout the winter.

According to Sir Keir, the “fully-funded” plan will save the typical family £1,000 and keep inflation under control.

The party has also said the plan will be partially covered by removing an “absurd loophole” in the windfall tax that was initially announced by the Government in May.

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Labour says that as it stands, a policy within the windfall tax means that for every £1 invested, 91.25p goes back to the oil and gas companies in additional tax relief.

Rishi Sunak announced a windfall tax when he was Chancellor, but Labour has criticised the current policyRishi Sunak announced a windfall tax when he was Chancellor, but Labour has criticised the current policy
Rishi Sunak announced a windfall tax when he was Chancellor, but Labour has criticised the current policy

Removing these investment allowances - and backdating the start date to January - would raise £8 billion to help with living costs, according to Sir Keir.

Other measures in the plan include:

  • support for customers not protected by the price cap 
  • equalising prices for people on prepayment metres and for those who pay bills monthly
  • closing a loophole in the Government’s current energy profits levy
  • a promise to use the already pledged £14 billion of non-targeted funding to prevent bills from rising 
  • insulating 19million homes across the country over the next decade in order to reduce energy demand and lower bills

The Labour Party has also detailed a plan for energy sustainability, which includes doubling the UK’s offshore wind capacity, investing in solar, tidal and hydrogen, and bringing forward new nuclear capacity.

What has Sir Keir Starmer said?

Sir Keir said the plan will “fix the problems immediately and for the future”, as he warned that the cost of living crisis was worsening - with people “scared about how they’ll get through the winter”.

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He added that the Conservative Party had “failed to prepare” and “refused to invest”, resulting in higher bills.

Referring to the cost of living crisis, the Holborn and St Pancras MP continued: “This is a national emergency.

“It needs strong leadership and urgent action.”

Sir Keir Starmer has announced Labour’s plan to tackle skyrocketing energy billsSir Keir Starmer has announced Labour’s plan to tackle skyrocketing energy bills
Sir Keir Starmer has announced Labour’s plan to tackle skyrocketing energy bills

On BBC Radio 4’s Today programme, Sir Keir criticised the current Government’s approach to energy bills.

He commented: “We asked ourselves: do we want a plan that allows those prices to go up, causes that anxiety… but doesn’t do anything about inflation, or do we want to be more radical, more bold, more ambitious?

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“One of the benefits of our proposal is that it brings inflation down, which benefits everybody, but particularly those who are most vulnerable and those who are least well off.”

In the plan, Sir Keir also ruled out nationalising energy companies, which former Prime Minister Gordon Brown suggested introducing as a temporary measure.

“If you go down the nationalisation route, then money has to be spent on compensating shareholders,” Sir Keir explained.

What has the response been?

Director of the Institute for Fiscal Studies Paul Johnson warned that inflation would pick up again once the subsidies ended, resulting in an increase in debt.

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He told The Telegraph: “It’s an illusion in the sense that it will reduce interest debt payments in the short term.

“Unless you maintain these kinds of subsidies permanently, it won’t reduce them in the long run.

“Inflation will be higher later on.”

Research by the Institute for Public Policy Research (IPPR) however supported Labour’s case for an energy price cap freeze, arguing that it would ease the burden on families.

Likewise, the End Fuel Poverty Coalition - a group of around 60 charities, unions and anti-poverty organisations - welcomed the plan, with co-ordinator Simon Francis saying he hoped the announcement was “the start of politicians finally waking up to the fuel poverty crisis this winter.”

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He added however that additional support will still be needed for some of the most vulnerable households.

Liberal Democrat leader Sir Ed Davey mocked the timing of Labour’s policy announcement.

He wrote on Twitter: “Glad you liked my proposal to cancel the energy price rise.

“I also have some thoughts on electoral reform that you’re welcome to adopt.”

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The Kingston and Surbiton MP proposed an energy price cap freeze one week ago.

What is the Government currently doing to help with energy bills?

The Government has pledged a one-off £400 energy bill discount, which will be paid to all UK households in October.

There will also be a £650 payment to support low-income households, and a £300 payment to pensioner households.

Those on disability benefits will have an extra £150 added to their usual benefits payment.

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At the moment, current Chancellor Nadhim Zahawi is thought to have asked Treasury officials to draw up plans to cut energy bills by an extra £400 in January.

This will be implemented through a new lending scheme for energy providers.

However, the scheme would not be introduced in time for the bill increases the country will see in October.

Rishi Sunak and Liz Truss are facing pressure to outline their plans for the cost of living crisis as the Tory leadership race continuesRishi Sunak and Liz Truss are facing pressure to outline their plans for the cost of living crisis as the Tory leadership race continues
Rishi Sunak and Liz Truss are facing pressure to outline their plans for the cost of living crisis as the Tory leadership race continues

Adam Scorer, chief executive of National Energy Action, said: “[The Treasury’s plan] doesn’t seem proportionate to the cost of living crisis.”

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This comes as Rishi Sunak and Liz Truss face increased calls to do more to support low-income families, in order to avoid a winter in which households resort to “desperate measures” to afford their bills.

Looking ahead to tonight’s hustings event, former Labour leader Ed Milliband said: “The candidates must immediately clarify whether they agree with Labour’s proposals, and if not, what their alternative proposals are.

“The British people deserve answers, not more delay from a distracted and out-of-touch Conservative Government.”

The Tory leadership contenders have both outlined some of their plans for the cost of living crisis, but have frequently clashed over their views - with the former chancellor pledging increased financial aid, and the current Foreign Secretary expressing her preference for tax cuts.

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