Starmer vows to extend windfall tax in ‘emergency’ plan

The Labor leader has unveiled a £29billion contingency plan to deal with soaring energy bills

The Labor leader has outlined the party’s £29bn contingency plan to halt the surge in winter energy bills – paid in part by an extension of the windfall levy on oil and gas company profits.

Sir Keir Starmer has vowed to extend the windfall tax to freeze the family’s fuel bills this winter (Picture: BBC)

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Sir Keir said his “fully funded” proposals were a direct response to a “national economic emergency” and under his plan consumers would “not pay a dime” for their gas and electricity for months to come, reducing the average household would save £1,000.

As well as pledging to freeze the energy price cap at its 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 and cut bills further.

The said scrapping of planned increases in the cap, which is expected to rise above £3,500 in October and exceed £4,000 in January, would bring inflation down 4% and make future rate hikes less likely.

The party said the price freeze would mean it would not pass on the £400 rebate on energy bills that the government promised to all households in October in a bid to mitigate the impact of rising prices.

Asked about the possible duration of the freeze, Labor leader Sir Keir Starmer told BBC Radio 4’s Today programme: “We have to assess the situation in April as it is forecast according to the forecasts and we have for everyone on this one Plan maintained the credible forecasts, the latest of which came out last Tuesday.”

He added: “It’s all very good to have short-term answers that we need to have about what the medium and long-term plan is and that’s why I argued about a year ago that applies to the 19 million homes that are need to be insulated and large amounts of heat and energy are escaping, we need a comprehensive plan to isolate them.”

Sir Keir added that Labor was also committed to action to increase Britain’s energy security, doubling onshore and offshore wind capacity, investing in solar, tidal and hydrogen and pushing new nuclear capacity.

He said: “Britain’s cost of living crisis is worsening and people are scared of how they will weather the winter.

“We’ve had 12 years of Tory government unprepared and refusing to invest, making the bills higher and our country less secure.

“This is a national emergency. It needs strong leadership and urgent action.

“Labour’s fully funded plan would solve the problems now and into the future – helping people get through the winter while laying the foundations for a stronger, safer economy.”

However, the Institute for Fiscal Studies (IFS) questioned Labour’s explanation of funding for the support package, saying some of its proposals were an “illusion”.

How will Labor pay for the measures?

To pay for the £29 billion emergency package, Labor said it would fill a “loophole” in the levy on energy company profits announced by Tory lead candidate Rishi Sunak in May when he was chancellor and backdate the beginning to January . This, combined with rising global prices, would raise £8 billion.

The party said £14bn would come from other measures, such as scrapping the £400 energy rebate and forgoing pledges from Tory leadership contenders – like ending the “green levy” on fuel bills that Liz Truss is proposing, or the abolition of VAT on domestic fuel bills, as promised by Mr Sunak.

By keeping inflation low, which it said would peak at around 9% instead of the 13% forecast by the Bank of England, Labor said it would reduce the government’s debt interest payments by a further £7 billion.

However, IFS Director Paul Johnson warned that inflation would pick up again quickly after subsidies ended, meaning the cost of servicing debt would also rise.

He told The Daily Telegraph: “It’s an illusion in the sense that it will reduce interest debt payments in the short term, but if you don’t keep those kinds of subsidies in place it won’t reduce them in the long term. Inflation will be higher later.”

In response to IFS comments on Labour’s plan, Sir Keir told BBC Breakfast: “What Paul Johnson (Director of the IFS) does not dispute is that our plan will reduce inflation, so he is absolutely aware that this is the case.

“Of course he is right in saying that what happens after April matters because you have to maintain policies to reduce inflation. Of course we need to do that in April when we see the circumstances, but what he doesn’t imply is that we’re wrong when we say our plan will bring inflation down.”

Labor also presented a business support package with a £1billion emergency fund to support energy-intensive industries – like ceramics, glass and steel – and an increase in the corporate tax threshold for small businesses.

The party said it would be funded by an increase in the Digital Services Tax (DST) rate this year, raising at least £2billion from the most profitable global tech giants.

Sir Keir’s plan will increase pressure on Ms Truss and Mr Sunak to spell out what they would do to help families struggling with rising bills if they become Prime Minister.