Truss allies warn Starmer vow to freeze energy bills 'pure socialism'

2022-08-14

Keir Starmer’s plan ‘would make crisis worse’: Liz Truss allies warn vow to freeze cap on energy bills is ‘pure socialism’… and would lead to higher taxes

Labour leader Kier Starmer suggested a ban on energy bills rising this winter
He ‘wouldn’t let people pay a penny more’ than now for gas and electricity
This would save the average household £1,000 and cut inflation, say Labour
Senior Tories say the plan is unworkable and energy firms could go bust

Keir Starmer was last night accused of pursuing fantasy economics by suggesting a ban on energy bills rising this winter.

The Labour leader’s long-awaited proposal to help families struggling with the soaring cost of living is to freeze the energy price cap at its current level of £1,971 rather than letting it rise to £3,500 as expected.

He will say today he ‘wouldn’t let people pay a penny more’ than they now do for gas and electricity, saving the average household £1,000.

Labour said the £29billion policy is fully funded, would cut inflation – and would be paid for by widening the scope of the windfall tax on oil and gas producers and backdating it from May to January.

But senior Tories have branded the idea unworkable as energy firms are facing higher wholesale prices – which would risk them going bust if they are not allowed to pass costs on to consumers.

Keir Starmer (pictured on Friday) was last night accused of pursuing fantasy economics by suggesting a ban on energy bills rising this winter

Energy minister Greg Hands told the BBC yesterday: ‘We’ve got to remember energy price rises are set globally, they’re driven by Vladimir Putin’s invasion of Ukraine.

‘We would have to find a way to compensate people [for] effectively trying to abolish that price rise, and that would inevitably lead to higher taxes.

‘So I think we have to be a little bit careful. Labour’s seemingly magical solution to just wish it all away – that will have consequences.’

Allies of PM hopeful Liz Truss (pictured speaking during a hustings event on August 11) say the price freeze is unworkable and would lead to higher taxes

Former minister Sir John Redwood, expected to be one of Liz Truss’s economics advisers if she becomes prime minister, said: ‘Banning price rises cannot work because companies need to be able to cover their costs.’

He said Labour’s plan risked following the model in Venezuela, where price controls on basic foods by the socialist government led to shortages and black markets.

He added: ‘If you want to see what happens, go to a pure socialist country. They discovered that if you try to keep the prices down there isn’t enough supply.’

Mr Redwood pointed out more than 30 energy firms went bust last year as wholesale prices surged while the price cap limited their ability to increase bills, leaving taxpayers to keep them afloat.

Mr Redwood added on Twitter: ‘If Labour thinks government can keep prices down by simply passing a law why don’t they propose we do that for food, clothes and many other things as well as for energy?

‘Try this and end up with empty shelves. The Venezuela model leads to poverty.’

The announcement from Sir Keir, who has returned from holiday, is likely to put the Tory leadership contenders under pressure to come up with fresh measures themselves, with 70 charities urging them to double the £1,200 pledged to low-income families so far to avert a ‘catastrophe’.

Miss Truss is prioritising tax cuts and is opposed to a bigger windfall tax, while Rishi Sunak has promised more support.

Whoever enters No 10 next month could also implement a multibillion-pound package reportedly drawn up on the orders of Chancellor Nadhim Zahawi.

It would see energy bills cut by £400 through a technical change to the way the price cap works.

Climate change tsar Alok Sharma said: ‘To provide support with energy bills, particularly to help the most vulnerable, the new prime minister will need [to] deploy ‘bazooka’ measures – a peashooter approach won’t do.’

Last night Labour’s plan was supported by Luke Murphy of the Left-leaning think-tank the Institute for Public Policy Research.

He said: ‘These proposals would prevent soaring energy bills from pushing millions into debt and destitution, and hold down ever rising inflation…’

Labour said it would raise £14billion by scrapping the £400 rebate for households this winter and £8billion by closing a windfall tax loophole giving energy giants a discount if they invest in the UK, with the last £7billion needed coming from lower debt interest payments as inflation falls.

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