London Daily

Focus on the big picture.
Wednesday, Aug 26, 2026

Credit Starmer for having an energy crisis plan - but it's a questionable short-term fix

Credit Starmer for having an energy crisis plan - but it's a questionable short-term fix

But nevertheless, there are big holes in Labour's plan to tackle the crushing cost of living crisis facing the UK.

Credit Sir Keir Starmer for at least trying to come up with a costed plan to tackle the UK's burgeoning household energy bill crisis.

It's more than Boris Johnson's zombie government, or the two people vying to succeed him, have done.

That said, Labour's proposals to freeze the energy price cap at the present £1,971 at best raise more questions than answers. At worst, they are deeply flawed.

Firstly, the arithmetic. Labour has costed its plan at £29bn for six months.

The lion's share of this would come from the £14bn saved in not paying the flat £400-per-household rebate on energy bills the government is promising from October. That much is beyond dispute.

A further £8bn would come from backdating the government's 25% levy on the profits of oil and gas producers in the British North Sea, announced in May by then chancellor Rishi Sunak, to January this year and by closing what Labour describes as the "absurd loophole" in the levy - the 91p-in-the-pound tax relief that the government is making available to oil and gas producers investing in new projects in the region.

The remainder would come from £7bn that Labour says would be saved by a reduction in interest payments on government borrowing as a result of the lower inflation that would ensue from keeping household energy bills down.

The latter two assumptions, though, are questionable. When Mr Sunak announced his windfall tax on the profits of North Sea oil and gas producers, he predicted it would raise £5bn over its first year, so Labour is clearly assuming an extra £3bn can be raised by backdating the tax to January and by scrapping the tax relief offered on new investments.

That assumption is doing some heavy lifting. It is very hard to say how much more this measure will raise.

Politicians - and some in the media - like to single out the global oil and gas giants like BP and Shell and, accordingly, much was made of the comments from Bernard Looney, BP's chief executive, when he said in May that a windfall tax would not affect BP's plans to invest £18bn in the UK during the rest of the decade.

But BP and Shell are big global companies and only a very small proportion of their profits are derived from the British North Sea.

The vast majority of production in the region these days is accounted for by companies less well-known to the public, such as the FTSE-100 newcomer Harbour Energy, Israeli-owned Ithaca Energy, UK-listed Serica Energy and Equinor, the Norwegian state-owned oil and gas producer.

The first three of those in particular are far smaller than the oil supermajors and far more dependent on the British North Sea - and their investment plans for the region are, accordingly, much more sensitive to windfall taxes.

Many of these companies, including Equinor, were already questioning their planned investments following Mr Sunak's levy.

It is likely that the questioning would intensify were Labour's proposals to see the light of day.

As questionable are the assumptions being made about the interest payable on government borrowing. Yes, if inflation comes down as a result of household energy bills being capped, that would temporarily reduce an element of those debt interest payments.

But these proposals are only for six months - and so, when bills began to rise again, so would inflation and that component of the national debt linked to inflation.

As Paul Johnson, director of the independent Institute for Fiscal Studies, told the Daily Telegraph: "It's an illusion in the sense that it will reduce interest debt payments in the short term but unless you maintain these kinds of subsidies permanently, it won't reduce them later on. Inflation will be higher later on."

Perhaps the biggest problem with Labour's proposal though, is that this is only a short-term fix, seeking to alleviate pain for households in the immediate term.

There is nothing in it, by the way, for hard-pressed business consumers of energy - many of which could be forced over the edge by higher energy bills.

Moreover, there is nothing in these proposals to tackle the fundamental problems faced by the UK around energy supply and demand.

Capping household energy bills at the existing level will do nothing to bring down energy consumption or to encourage households to invest in energy-saving measures such as insulation, solar panels or heat pumps. Nor will it do anything to tackle the supply side of the equation.

Britain does not buy much gas from Russia, but it is now competing for gas supplies with those countries that do, which is the main reason why wholesale energy prices are rising.

The biggest way of guaranteeing lower wholesale prices in the longer term is to either reduce energy demand or promote an increase in energy supplies.

These proposals do neither.

To that extent, they are reminiscent of George Osborne's Help to Buy scheme, which propped up housing demand - if not to say boosted it - while doing nothing to increase housing supply.

Newsletter

Related Articles

0:00
0:00
Close
Church of England Faces Renewed Scrutiny Over Historical Safeguarding Failures
Reform UK Proposes £30 Tax Credit for Long HMRC Telephone Queues
Greater Manchester Secures More Than £100 Million to Upgrade Victorian Railway Stations
East Midlands Railway Urges Essential Travel Ahead of Bank Holiday Strikes
UK Economy Grows 0.4 Percent in Second Quarter as Global and Energy Pressures Weigh
UK Government and Sainsbury’s Launch Plan for 10,000 Youth Work Experience Placements
Scottish Government Plans Tighter Remote-Working Rules and Possible Voluntary Redundancies
Scottish Budget Faces More Than £700 Million Reduction After Tax Revenue Adjustment
Nearly 100 Labour MPs Press Andy Burnham to Back Electoral Reform Commission
UK Energy Price Cap Rises Four Percent to £1,723 as Middle East Conflict Drives Wholesale Gas Costs
Turnbull Warns AUKUS Could Leave Australia Without Promised Nuclear Submarines
California Billionaires Pour More Than $150 Million Into Fight Over Proposed Wealth Tax
German Broadcaster Goes Dark to Warn AfD Could End Its Saxony-Anhalt Service
Badenoch Plans Major Shadow Cabinet Reshuffle as Tories Struggle in Third Place
UK Government Demands Action Against Social Media Content Promoting Dangerous Driving
Labour Backbenchers Prepare Push for Electoral Reform Under Andy Burnham
Fire at Gatwick Airport Car Park Destroys 140 Vehicles and Cuts Local Power
UK Plans Voluntary Libido-Suppressing Medication Programme Across 20 Prisons
NHS England Launches Free Home Cervical Cancer Testing Kits Nationwide
Imperial College Study Warns North Sea Oil Projects Could Cause Hundreds of Billions of Pounds in Climate Damage
UK Inflation Rises to 2.9% as Middle East Conflict Pushes Up Energy Costs
Prime Minister Andy Burnham Visits Kyiv to Strengthen UK Support for Ukraine
Premier League Season Opens With Managerial Debuts and Dramatic Early Fixtures
England Cricket Drops Brydon Carse From Selection Pending Club Investigation
Graeme Dott Convicted of Child Sexual Abuse Offences in Scotland
Protesters Occupy British Aircraft Parts Factory Over Alleged Military Links to Israel
More Than 100 Former British and French Diplomats Call for Sanctions on Israel
Ipsos Poll Shows British Public Split Between Immigration Controls and Economic Growth
British Cybersecurity Agencies Raise Alert Over Growing Threats to Critical Infrastructure
Two-Thirds of England Now Under Official Drought Conditions After Prolonged Summer Heat
Institute of Directors Calls for Urgent Action to Revive Britain’s Stagnant Labour Market
Andy Burnham Visits Kyiv on First Foreign Trip and Pledges Continued British Support for Ukraine
New Daily Diabetes and Weight-Loss Pill Launches in UK Pharmacies
UK Payroll Employment Falls by 94,000 as Labour Market Cools
Onshore Wind Planning Applications in England Reach Ten-Year High After Rules Eased
UK Government Demands Social Media Platforms Remove Dangerous Driving Content After A66 Crash
Thames Water Creditors Face Backlash Over Proposed Corporate Restructuring
Twelve Arrested After Fatal A66 Crash Linked to Organised Crime Investigation
UK Household Energy Debt Could Reach £7 Billion by Year-End
UK Defence Ministry to Use Ukraine Battlefield Data to Train AI Security Systems
UK Government Redirects £4 Billion of Affordable Homes Funding Away From Social Housing
UK Government Borrowing Reaches £1.8 Billion in July, Exceeding Forecasts
UK Prime Minister Andy Burnham Pledges Advanced Missile Support for Ukraine
8Bank of England Holds Interest Rate at 3.75% as Middle East Energy Risks Rise
Prime Minister Andy Burnham to Give Ukraine Classified Storm Shadow Blueprints for Domestic Missile Production
UK Graduate Job Vacancies Plunge 45% to Lowest Levels on Record
Government Audit Reveals Pressure on UK Hospitality From Business Rates and Rising Costs
Kindertransport Survivor Prepares to Revisit European Sites Linked to Her Family’s Wartime Separation
Northern England Transport Operators Strengthen Contingency Plans as Travel Demand Rises
New Implant Trials Offer Treatment Prospects for Patients With Refractory Angina
×