“Tories now face an urgent choice,” Reeves warns as price cap rises to £3,549

Rachel Reeves has warned that the Conservatives “now face an urgent choice” to “carry on letting oil and gas companies make huge profits” or to “act now and stop the energy price cap rising”.

Commenting after the announcement from Ofgem this morning that the energy price cap will rise by 80% to £3,549 in October, the Shadow Chancellor said that the increase will “strike fear in the heart of many families, and force many to make unthinkable choices this winter”.

Ofgem approved the £1,578 increase on the current figure of £1,971 for the average dual-fuel tariff for gas and electricity bills earlier today. The cap will be almost treble what it was last October, when it was raised to £1,277.

“The Tories now face an urgent choice. They can carry on letting oil and gas companies make huge profits whilst every family suffers with bills rising this winter. Or they can act now and stop the energy price cap rising, by bringing in a windfall tax on those oil and gas profits,” Reeves said.

“People deserve a government that can meet the scale of this national emergency – not this spectacle of a Tory leadership race or a Prime Minister that put his out of office on months ago.

“Labour is on your side, and our fully-funded plan to freeze the price cap will make sure households don’t pay a penny more this winter, saving you £1,000. Our mission for home grown renewable energy and to insulate 19 million homes will keep bills down for the long term, too. Only Labour can give Britain the fresh start it needs.”

Ofgem said today that it would not make predictions for the next price cap change, which will be made in January 2023, because the market is “too volatile”. The regulator warned, however, that prices “could get significantly worse through 2023”.

Commenting on the increase announced today, Ofgem chief executive Jonathan Brearley said: “We know the massive impact this price cap increase will have on households across Britain and the difficult decisions consumers will now have to make. I talk to customers regularly and I know that today’s news will be very worrying for many.”

He said Russia’s invasion of Ukraine and reduction of gas supplies to Europe had driven the rise in wholesale gas prices, which he argued had left Ofgem “no choice” but to reflect cost increases in the price cap.

Brearley said the government’s package of support is “delivering help right now” but added that it is “clear the new Prime Minister will need to act further to tackle the impact of the price rises that are coming in October and next year”.

Director of Common Wealth Matthew Lawrence told LabourList that the announcement today is “dire news” and “proof that our energy system is divorced from the interests of the public”. He added: “30 years of regulation of our privatised energy sector have been a clear failure.

“Labour are right to call for a freeze in energy bills, which can protect households this winter. But we need to go further. Instead of subsidising companies run by private shareholders we need public ownership, so that we can reshape our energy system around public needs.

“This way we can plan the transition to cheaper, more secure clean energy and ensure energy is sold at cost-price, rather than for the profit of shareholders.”

The Labour Party announced last week that it would freeze gas and electricity prices immediately, keeping the energy price cap at its current level of £1,971 until April – a move it said would save the typical household £1,000.

The party said the proposal could be paid for in part by making changes to the windfall tax, including backdating the tax to include excess profits made since January and closing a loophole allowing tax relief on investment in the North Sea.

Full Fact argued that Labour has underestimated the cost of freezing energy bills this winter “by at least £5bn” because of a failure to take into account the rise in energy consumption over the colder months.

A Labour source said: “Full Fact don’t understand how energy bills work. We consulted Ofgem on how direct debit customers are billed and costed it accordingly.

“This isn’t the first time we’ve had to fact check Full Fact’s embarrassing sums back at them. In April, they were forced to to delete a number of their social media posts and issue a correction after getting their maths wrong about our local election campaign.”