Keir Starmer has declared that his party is “not going to stand by” while millions of households struggle to pay for energy this autumn as he unveiled Labour’s plan to freeze energy bills by introducing an expanded windfall tax.
In a BBC Radio 4 interview this morning, the Labour leader said the party would freeze the energy price cap at the current level so that the expected 80% rise in October – taking average household bills to £3,600 a year – will not take place.
“We’ve got to make a choice. We can either let oil and gas companies continue to make huge profits that they didn’t expect to make whilst families and millions of people struggle to pay their bills or we do something about it,” he said.
“The Labour Party is not going to stand by. We have made the choice that those oil and gas companies should pay a windfall tax on the excess profits that they didn’t expect to make so that we can freeze the cost for families.”
Labour said its plan, which would cost £29bn, can be funded by backdating the windfall tax to include excess profits made since January, closing the loophole in the levy allowing tax relief on fossil fuel investment, halting the proposed £400 payments for all households and lowering government interest payments on debt.
The Labour leader told listeners on BBC Radio 4’s Today programme that there is a “double benefit” to his party’s proposal, which is that “the prices don’t go up in the first place” and that it will reduce inflation “down from possibly 13% to 9%”.
“By doing it across the board, we get both an answer to the question what are you going to do to help millions of families with bills that they simply can’t afford, secondly what are you going to do to get inflation down,” he said.
Put to him that retrospectively increasing the tax burden on companies could deter future investment in the UK, Starmer said: “No, it was in January that we first proposed a windfall tax so what we’re saying is that’s when a windfall tax should start because that’s what we would have done in government.”
He added: “We’re saying the windfall tax is on the excess profits that those companies did not expect to make. So, they already projected the profits they expected and they had investment built into that.
“Nobody is quarrelling with that or interfering with that. What we’re saying is, where you’ve made profits over and above what you even thought you were going to make – and by the way it’s gone up again since January – then that isn’t going to affect investment.”
Asked whether Labour would extend the freeze beyond the six months announced today, the Labour leader said: “We’ll have to assess the situation in April according to the forecasts as they then are, and we waited for this plan for all the credible forecasts, the last of which came out last Tuesday.
“But, I mean, the challenge you put to me is a very good challenge, which is: it’s all very good having short-term answers, which we do need to have, what’s the medium- and long-term plan?
“And that’s why, just about a year ago, I was making the argument that for the 19 million houses that need insulating and are leaking huge amounts of heat and energy, we need a comprehensive plan to have insulation on those. I set that out 12 months ago, if we’d actioned that plan, two million houses would already be insulated.”
Asked why the party is not considering nationalising energy companies, in light of the cost of the proposed plan, he told listeners: “Under our plan, fully-costed, every single penny will go on keeping those prices frozen and not allowing them to go up.”
He argued: “If we were to add nationalisation to our plan and add more cost to it through that, that would mean using the money to pay shareholders because you don’t nationalise for free, you’ve got to compensate the shareholders.
“So I would be having to come on your programme and say ‘I’m going to use x billion pounds not to reduce the bills for millions of people in the autumn, but actually to compensate shareholders’.”
The TUC has called for a “pragmatic reshaping” of UK energy so the country is “more in line” with other European countries that it says are “finding it easier” to weather the crisis. The federation of unions urged ministers to take the ‘big five’ companies into public ownership, a plan it said would cost £2.5bn.
Asked why Labour is not echoing the call for the government to nationalise energy companies, given that its plan would cost £29bn to freeze energy bills for six months, Starmer said: “Every penny should be used to reduce the bills of households across the country, not used to compensate shareholders in energy companies.”
Sharon Graham, general secretary of Labour’s largest affiliated union Unite, said this morning that Labour’s plan is a “step forward from what’s been proposed until now” but added that a “piecemeal approach won’t work”.
“The case is being made before our own eyes that selling off our energy sector to the private profiteers has ended in tears,” she said. “Only days ago, BP announced that in April to June this year it had made almost £7bn profits. On the same day it was being openly contemplated that household energy bills in the UK could rise to £3,600 a year.
“Labour’s new plans – although a step forward from what’s been proposed until now – only address the second part of this dichotomy. Not the first. These figures prove that the British economy does not work for workers and their families. Britain’s real crisis isn’t rising prices – it’s an epidemic of unfettered profiteering.
“Energy firms, like Scottish Power, owned by Spain’s Ibedrola, or the French state-owned EDF, own huge swathes of our energy supply. It seems that public ownership is only to be heralded as long as it is not the British people doing the owning.”