The Labour leader, Keir Starmer, is to 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 demand to freeze the energy price cap at the current £1,971 level – blocking the regulator Ofgem from allowing a huge anticipated rise to around £3,600 in October – will place intense pressure on the Tory leadership candidates Liz Truss and Rishi Sunak to follow suit when one becomes prime minister.
Starmer’s plan, to be announced on Monday, comes as 70 of the country’s biggest charities and organisations across health, mental health, education, care and other sectors, today warn Truss and Sunak in a joint letter of dire consequences throughout British society unless they take more drastic action to address the energy and wider cost of living crises.
Paul Kissack, the chief executive of the Joseph Rowntree Foundation (JRF), which co-ordinated the letter, said the UK faces a “national emergency” while the government is “asleep at the wheel”.
Demanding urgent help for the most vulnerable, in the form of a doubling of the £1,200 that was committed earlier this year to households on means-tested benefits, Kissack said: “Without it, vulnerable people will face a catastrophe on a vast scale when winter sets in. The consequences of sitting idly by are unthinkable.”
Starmer, who returned from holiday at the end of last week, has come under pressure to say more on energy prices after former Labour leader Gordon Brown made the running with 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 cap, as well as the temporary nationalisation of energy companies which refuse to offer lower bills.
In a pointed remark which some saw as a glancing reference to Starmer, Brown wrote in the Guardian last week: “Time and tide wait for no one. Neither do crises. They don’t take holidays and politely hang fire.”
It is understood that Starmer will call on the government to instruct Ofgem to freeze the cap on bills, saying it is within its power to do so.
Senior sources said the choice for Labour had been between supporting huge amounts of extra cash help to the most vulnerable or preventing a massive autumn hike in energy prices happening at source. “It seemed best to stop the rise happening in the first place,” said a senior insider.
In response to rapidly rising wholesale prices, Ofgem warned in May that the cap would have to rise by around 40% to about £2,800 in October. Since then, forecasts have shot up, with analysts at Cornwall Insight last week predicting an increase of £3,582, more than 80% higher than the current limit. They also forecast further increases to £4,266 in the first quarter of 2023.
New analysis for the Institute for Public Policy Research thinktank, commissioned by the Economic Change Unit, finds that freezing the price cap would not only save families more than £2,000 but also help peg back inflation, preventing it from being “embedded” in the economy.
The research says that if the cap were to be lifted to £3,600, as predicted, inflation would soar to around 13%, but if it were frozen at £1,917, inflation would be held at 9.2%.
Sarah-Jayne Clifton, executive director of the Economic Change Unit, said it was time for government to act and make energy companies pay: “Other countries have held down prices to protect the financial security of citizens. There is absolutely no reason why our government can’t do the same and shift the burden on to those profiteering 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, the TUC, Shelter, MacMillan Cancer Support, Mind, Oxfam GB and Action for Children, tell the Tory leadership candidates that “the cost of living crisis on low-income households is the gravest issue our country faces”.
They add: “So far this year, nearly 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 people having to skip meals or not being able to heat their homes properly.
“Many of our organisations work directly with these families and are becoming overwhelmed, too often unable to provide the support so desperately needed.
“This situation cannot be allowed to continue. As the prospective leaders of this country, we urge you to act now to demonstrate the compassion and leadership needed to tackle this issue head on.”
Isabel Hughes, policy engagement manager at the Food Foundation, who also signed the letter, said: “Continuing price rises and the approach of winter will continue to make life harder for low-income families, and those who have received proportionally less support so far are at particular risk. The government urgently needs to shield families from the worst impacts to protect children’s health and future.”
New polling for the Liberal Democrats, who also back a cap freeze, on Sunday reveal that seven out of 10 Tory voters back plans to cancel the October rise. The party leader, Ed Davey, said the move should be funded through “a tougher windfall tax on the energy giants making record profits”.
Labour said last night 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 bills are so high. Too many working people and pensioners live in draughty, cold homes with high heating costs. If they were serious about cutting bills, they could start right now, by delivering the warm homes plan Labour has called for. A proper national mission would save 19 million families over £1,000 on bills and boost our energy security.”