The Labour Party is preparing to make several significant policy interventions on the economy to combat the rapidly worsening cost-of-living crisis.
According to PoliticsHome, the Labour leadership is preparing to make several announcements as households struggle with record-high inflation. Keir Starmer is due to set out the details of the first in a speech as early as next week.
Party insiders told the news website that the first intervention will reflect “the scale” of the crisis and could be revealed as soon as Monday. The reports emerged after the Lib Dems argued this week that the government should “absorb the cost of the upcoming hike in energy bills” with an “energy furlough scheme”.
Writing in The Guardian on Monday, Lib Dem leader and former Energy Secretary Ed Davey proposed a £36bn-a-year scheme alongside an expanded ‘windfall tax’ on oil and gas producing companies, which he said could raise as much as £20bn.
He said the government should scrap the planned £1,400 energy price cap increase in October. The cap, which regulate Ofgem raised by £693 in April, is expected to increase to around £3,400 – a hike of 70%. Cancelling the rise would mean the energy bill for a typical household would remain at £1,971 a year.
A Labour Party adviser dismissed the plan put forward by Davey this week, telling PoliticsHome that the policy intervention demonstrated that the Lib Dem’s “reputation for creative accounting” is “alive and kicking”.
“They’ve used forecasts that were out of date before the ink on their press release was dry. They want to break numerous taxation treaties with their plan to unilaterally tax the profits of companies twice,” they added.
“And their constant references to a VAT windfall are wishful thinking – we’re heading into a recession, which is hitting spending and VAT receipts.”
The Tory leadership election is due to conclude in September. The new Prime Minister will deliver their first Conservative Party conference speech just days after the energy price cap is raised on October 1st.
Liz Truss is currently the favourite to win the contest, over rival Rishi Sunak. Labour is reportedly confident about facing Truss, and her expected Chancellor Kwasi Kwarteng, when she enters Downing Street.
“The Tory leadership campaigns are playing to a gallery of Tory members – none of whom want ‘handouts’. But they also want to win the next election, and they’re not speaking to the country,” a senior Labour source told PoliticsHome.
“Far and away the biggest issue is the cost of living. I’m astounded they haven’t done more to show they recognise that. We’re going to get on that.”
Truss received widespread criticism after she said in an interview with the Financial Times that she would “look at what more can be done” in the light of warnings from the Bank of England about a 15-month recession but added: “The way I would do things is in a Conservative way of lowering the tax burden, not giving out handouts.”
A report, commissioned by Gordon Brown and carried out by Professor Donald Hirsch at Loughborough University, found that 35 million people in 13 million households across the country are under threat of experiencing fuel poverty in October.
Writing in The Observer on Sunday, the former Labour Prime Minister told readers: “The reality is grim and undeniable: a financial timebomb will explode for families in October as a second round of fuel price rises in six months sends shock waves through every household and pushes millions over the edge.”
The research found that the one-off £1,200 support from the government for low-income households will not compensate for three major blows to incomes in the year up to October 2022: the loss of the £20-a-week benefit uplift, the rise in the energy price cap and an annual uprating out of line with inflation forecasts.
Brown called on Boris Johnson and the Tory leadership candidates to agree an emergency Budget, but the No 10 spokesperson said on Monday that measures had already been announced by the government and that Johnson is abiding by the convention not make significant fiscal interventions in his final weeks in the job.
The Bank of England recently warned that inflation, which is currently at 9.4%, could peak at more than 13% and stay at “very elevated levels” throughout much of the next year before eventually returning to its 2% target in 2024.