The Labour party has revealed its raft of proposals to tackle the cost-of-living crisis, which would be partly funded by extending the windfall tax on the profits of oil and gas companies.
The plan would be financed by backdating the windfall tax to January and taking into account higher oil and gas prices to generate £8 billion, while the confirmed £400 energy rebate and other promises made by the Conservative leadership candidates would be scrapped to raise a further £14 billion.
Labour says that by lowering energy bills and thereby bringing inflation down, government debt interest payments would fall by £7 billion.
The party also advocates a freezing of the energy price cap at its current level of £1,971, and Labour leader Sir Keir Starmer says that such a move would bring inflation down by four per cent.
Inflation rose to 9.4 per cent in June and the Bank of England has forecast that it could exceed 13 per cent later in the year.
Sir Keir has said that his party’s plan would see the household save an average of £1,000 on energy bills.
However, there is concern over the costs of delivering the plan. Paul Johnson of the Institute for Fiscal Studies [IFS] called it “very expensive” and akin to the “cost of furlough” during the Covid-19 pandemic.
Johnson 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.”
Sir Keir said that the plan was compiled to get households through the winter months as a priority, and then his party would “assess” the situation again in April.
He hinted that further anti-inflationary measures may be needed in 2023 and that his party was pushing for further action such as rolling out insulation to UK homes to further increase energy savings.
The government has already set aside £37 billion for struggling households but is facing calls to do more.
Support already announced includes £400 off energy bills for all UK households and an additional £650 payment for eight million vulnerable households.
Prime minister Boris Johnson has said that decisions on further support will be up to his successor and that ministers were in the process of “making sure there is extra cash” to provide for cost-of-living policies.
The IFS has said that ministers will need to find an additional £12 billon if its £24 billion package announced in May is to have the desired effect, due to energy prices increasing.
In May, the think tank said that energy prices were expected to increase by 95 per cent in 2022-23, but this has been revised to 141 per cent.
Elsewhere, Conservative leadership hopefuls Rishi Sunak and Liz Truss have distanced themselves from extending the windfall tax or freezing the price cap to help finance additional support for households.
