The Labour Party has set out a £29 billion plan to freeze energy bills over the coming winter.
It would save the typical family £1,000 now, help get energy costs under control for the future and tackle inflation, according to the party.
The plan will include freezing the price cap, which will in turn help to bring inflation down by 4%, making future interest rate rises less likely. The cap is predicted to grow to more than £4,200 in January according to the most recent forecast from Cornwall Insight, as wholesale prices continue to be exceptionally volatile on the back of geopolitical uncertainty.
It will also look to support customers not protected by the price cap, and make sure those on prepayment meters pay the same for energy as those who pay monthly, the party noted.
Additionally, the plans include a longer-term commitment to insulate 19 million homes across the UK over the next decade as part of its Warm Homes Plan.
“Britain’s cost of living crisis is getting worse, leaving people scared about how they’ll get through the winter,” said Keir Starmer MP, leader of the Labour Party.
“Labour’s plan to save households £1,000 this winter and invest in sustainable British energy to bring bills down in the long-term is a direct response to the national economic emergency that is leaving families fearing for the future.”
The plan is based on one unveiled by the Labour Party at the beginning of 2022, focused on using a tax to oil and gas giants as a key funding mechanism.
In May, then-chancellor Rishi Sunak unveiled a 25% windfall tax of oil and gas majors in a move dubbed the Energy Profits Levy, this is being used to fund the current support mechanisms announced by the government.
Core to this is a £400 support payment set to be provided to each household over six months from October to help mitigate soaring energy bills over the winter.
While this support was initially welcomed, as wholesale prices have continued to grow over recent months calls have been growing across the political spectrum as well as from charities and the energy sector itself, for the government to step up its support measures.
The Labour Party has said the £29 million plan is a fully-funded measure that will be paid for in the three ways; firstly increased tax revenues from oil and gas companies.
As part of this it will look to close “the Government’s absurd loophole in their Energy profits levy”.
The levy includes a 80% investment allowance, an element that was widely criticised when first announced. The Treasury stated this will encourage investment and growth, but there are concerns that it will just lead to further growth in the oil and gas sector that are incompatible with net zero or a reduction in bills.
It will also backdate the start of its tax to when the Labour Party first called for a windfall tax in January, and account for higher gas and oil prices. Ultimately, it expects such a tax to raise £8 billion.
Secondly, the Labour Party would use its already-pledged £14 billion of non-targeted funding to prevent bills from rising further. This would give people the security to plan ahead, rather than requiring hand-outs later on, it added.
And finally, by keeping energy bill down it will reduce the rate of inflation, which will lead to government debt interest payments reducing by £7 billion. Higher inflation increases government expenditure on gilts, which is how a significant proportion of government debt is held.
“We’ve had 12 years of Tory government that has failed to prepare and refused to invest, leaving bills higher and our country less secure. This is a national emergency. It needs strong leadership and urgent action,” added Starmer.
“Labour’s fully-funded plan would fix the problems immediately and for the future – helping people get through the winter while providing the foundations for a stronger, more secure economy. Only Labour can give Britain the fresh start it needs.”