Monday 15 August 2022 10:25 PM Keir Starmer's plan to freeze energy bills slammed by economists, ex-chancellor ... trends now
Labour's plan to cap energy bills was blasted by economic experts yesterday who warned it would cost more than the furlough scheme in the pandemic.
The Institute for Fiscal Studies said Sir Keir Starmer’s proposal to help struggling families was ‘very expensive’ and would not bring down inflation permanently.
And the Institute of Economic Affairs warned it would make the energy supply crisis worse and leave Britain ‘more exposed to expensive imports’.
Sir Keir has suggested freezing the energy price cap at its current level of £1,971 rather than letting it rise to £3,500 as expected.
But Paul Johnson, of the IFS, told BBC Radio 4’s Today programme: ‘The Labour Party’s own analysis suggests it would cost £30billion just for six months.
‘Now that really is a very large amount of money... and they would want to do that, I would have thought, for at least a year.
‘So you would be looking at £60billion – you’re looking at the cost of furlough. So that’s a very expensive scheme.
Sir Keir Starmer has pledged to freeze the energy price cap to help struggling families. Pictured right, meeting Dave Church and his ten-month-old daughter Ellen during a visit to Exeter to discuss the cost of living today
‘Of course, what it does achieve is to protect everybody entirely from the increases in energy prices. So if that is what you want to achieve, that is what you need to do. But you do need to recognise that is a very expensive thing to do.’
Mr Johnson said the plan would bring down inflation and interest on Government debt payments this year, but would not change the average rate of inflation if the subsidy is temporary.
He stressed: ‘So that’s not a real saving – it’s a saving this year but it is not a saving in the long run.’ Sir Keir said the length of the freeze would have to be assessed next April based on economic forecasts.
Sir Keir has suggested freezing the energy price cap at its current level of £1,971 rather than letting it rise to £3,500 as expected but the move has been slammed by economic experts. Picture shows the rise in energy prices
His proposal to extend the windfall tax on oil and gas company profits also came under fire from free market think-tank the Institute of Economic Affairs.
Its energy analyst Andy Mayer said: ‘High UK energy prices are caused by a global shortage of gas and domestic energy policies.
‘Labour’s proposal to punish companies for investing in the North Sea and continue a ban on fracking will extend the supply crisis.
'It will leave us more exposed to expensive imports, unable to help Europe reduce its reliance on Russia, and with lower tax returns from drilling.’
He also said the plan would not help businesses, but would ‘impede energy market competition ensuring higher costs’. Mr Mayer added: ‘This will inevitably mean higher bills or taxes for far longer than letting markets work.
‘Labour repeats errors made during the last energy crisis in the 1970s – economic mismanagement through “make believe” price controls – that left the UK seeking a bailout from the IMF [International Monetary Fund].’
The Labour leader has been under pressure to set out how his party would address the cost-of-living crisis.
Former Labour PM Gordon Brown last week called for an emergency budget, a price cap freeze and the temporary nationalisation of energy firms if they do not cut bills.
Asked if he and his party should have acted sooner, Sir Keir told BBC Breakfast he had wanted a ‘fully-costed, comprehensive plan’.
He insisted: ‘We’ve been working on that for six or seven weeks... I’ve got a very important job as leader of the Labour Party, leader of the Opposition.
'But I’ve also got another job that’s really important and that is I’m a dad and I’m not going to apologise for going on holiday with my wife and kids. It’s the first time we’ve had a real holiday for about three years.’
Labour’s former shadow chancellor John McDonnell criticised the policy, branding it a ‘short-term solution’ which would do ‘nothing extra’ to help the poorest households cope with existing bills.
He tweeted: ‘Freezing energy bills is right call, but short-term solution of giving £29billion of public money to energy companies with nothing in return – either control or ownership or reform – and back here in six months.’
Former Tory chancellor Philip Hammond labelled the plan ‘a populist response that is untargeted’.
He told Radio 4: ‘It’s fine for the Government to intervene to support people through a short-term pressure, but the Government can’t protect us indefinitely if this is a long term shift in relative prices.
‘So I don’t support Labour’s proposal because it is a populist
