Labor leader Keir Starmer will call for a ban on crippling energy price rises this autumn in a move that would save the average household more than £2,000 a year on gas and electricity bills, the Observer can reveal.
The call to freeze the energy price cap at the current £1,971 level – which blocks regulator Ofgem from allowing a huge expected rise to around £3,600 in October – will put intense pressure on Tory leadership candidates Liz Truss and Rishi Sunak to comply after when you become prime minister.
Starmer’s plan, due to be announced on Monday, comes as 70 of the country’s biggest charities and organizations across health, mental health, education, care and other sectors today warn Truss and Sunak in a joint letter of serious consequences in the UK society unless they take more drastic measures to deal with energy and cost of living crises.
Paul Kissack, chief executive of the Joseph Rowntree Foundation (JRF), which coordinated the letter, said Britain was facing a “national emergency” while the government was “asleep at the wheel”.
Kissack called for urgent help for the most vulnerable, in the form of a doubling of the £1,200 committed earlier this year to households on means-tested benefits, saying: “Without it, vulnerable people will face disaster on a large scale as winter sets in. The consequences of sitting still are unimaginable.”
Starmer, who returned from holiday at the end of last week, has come under pressure to say more about energy prices after former Labor leader Gordon Brown lined up a series of major interventions.
In the Observer last weekend, Brown called for an emergency budget. He has also demanded the freezing of the price ceiling, as well as the temporary nationalization of energy companies that refuse to offer lower bills.
In a pointed remark that some saw as a brilliant reference to Starmer, Brown wrote in Guardian last week: “Time and tide wait for no one. Nor crises. They don’t take vacations and hang around politely.”
It is understood Starmer will urge the Government to instruct Ofgem to freeze the rate on bills, saying it is within its power to do so.
Senior sources said the choice for Labor had been between supporting huge amounts of extra cash for the most vulnerable or preventing a massive autumn rise in energy prices at the source. “It seemed best to stop the boom that was happening in the first place,” said one senior insider.
In response to rapidly rising wholesale prices, Ofgem warned in May that the rate would need to rise by around 40% to around £2,800 in October. Since then, forecasts have shot up, with analysts at Cornwall Insight last week predicting a rise of £3,582, more than 80% higher than the current cap. They also forecast further increases to £4,266 in the first quarter of 2023.
New analysis for the Institute for Public Policy Research think tank, commissioned by the Economic Change Unit, finds that freezing the price cap would not only save families more than £2,000, but also help contain inflation, preventing it from becoming “embedded” in the economy.
The research says that if the rate were to be lifted to £3,600, as predicted, inflation would rise to around 13%, but if it were frozen at £1,917, inflation would be kept at 9.2%.
Sarah-Jayne Clifton, chief executive of the Economic Change Unit, said it was time for the government to act and make energy companies pay: “Other countries have kept prices down to protect citizens’ financial security. There is absolutely no reason why our government cannot do the same and shift the burden onto those who are profiting from this crisis.”
The energy price cap, introduced in 2019, limits the maximum amount energy suppliers can charge for each unit of gas and electricity used.
In their letter to Sunak and Truss, the 70 charities and other organisations, including JRF, AgeUK, Trussell Trust, Children’s Society, TUC, Shelter, MacMillan Cancer Support, Mind, Oxfam GB and Action for Children, tell the Tory leadership candidates that “the cost of living crisis for low-income households is the most serious problem facing our country”.
They add: “So far this year, almost three-quarters of low-income households receiving Universal Credit or other means-tested benefits, many of them working families, have been forced to go without at least one essential. This means that people have to skip meals or cannot heat their homes properly.
“Many of our organizations work directly with these families and are overwhelmed, all too often unable to provide the support that is so desperately needed.
– This situation cannot continue. As the potential leaders of this country, we urge you to act now to show the compassion and leadership needed to tackle this problem head on.”
Isabel Hughes, head of policy engagement at the Food Foundation, who also signed the letter, said: “Continued price rises and the approach of winter will continue to make life harder for low-income families, and those who have received proportionately less support so far are particularly vulnerable. The government urgently needs to shield families from the worst consequences in order to protect children’s health and future.”
New polling for the Liberal Democrats, who also support a cap freeze, reveals on Sunday that seven out of 10 Tory voters plan to cancel the October increase. Party leader Ed Davey said the move should be funded through “a tougher windfall tax on the energy giants with record profits”.
Labor last night said its plans to insulate more homes would save millions of families more than £1,000. Ed Miliband, the shadow climate change and net zero secretary, said: “Twelve years of failure by the Conservatives to insulate our homes is one of the reasons the bills are so high. Far too many working people and pensioners live in drafty, cold homes with high heating costs . If they were serious about cutting bills, they could start now, by delivering the warm homes plan Labor has called for. A proper national mission would save 19 million families over £1,000 on bills and increase our energy security.”