Labour has today launched the first part of its plan to beat the cost of living crisis, with a proposal to scrap “outrageous” rules which see customers using prepayment meters pay a higher price for energy.
Amid increasingly bleak warnings that the domestic energy price cap could top £5,000 by April, the party said its move would save up to 4 million of the poorest and most vulnerable Britons around £100 during the months of January, February and March when heating need is high.
The plan was unveiled after a crunch government summit with energy companies produced no new agreement on how to help households facing unaffordable rises in their gas and electricity bills this autumn.
Sir Keir Starmer has faced discontent from within his party’s own ranks over his failure so far to put forward radical ideas to deal with the crisis.
Sacked frontbencher Sam Tarry last week told The Independent Sir Keir risked being “blown over” by the scale of the cost of living crisis. And former Labour prime minister Gordon Brown appeared to take a swipe at the vacationing party leader by saying that “crises don’t take holidays”.
With Boris Johnson swearing off any major tax or spend announcements before the appointment of a successor on 5 September, it has been left to the likes of Mr Brown, consumer champion Martin Lewis and Lib Dem leader Ed Davey to lead the way with demands for action on energy bills.
Davey this week called for the scrapping of October’s price cap hike, which is expected to increase typical bills from £1,971 to more than £3,500. And Brown demanded temporary nationalisation for energy companies unable to offer lower bills.
Now Sir Keir is set to use a series of announcements over the coming days to set out a wide-ranging plan drawn up with shadow chancellor Rachel Reeves and climate change spokesman Ed Miliband to help keep the heating and lights on this winter.
Ms Reeves today denounced the premium charged to prepayment meter users as “unjustifiable and morally wrong”.
She asked: “Why should those with the least have to pay more to heat their homes and put the lights on?”
Energy regulator Ofgem earlier this year increased the annual price cap for an average household on default tariffs paying by direct debit from £1,277 to £1,971 – a £693 increase.
But for prepayment customers, who are often from lower-income households, there was a £708 increase from £1,309 to £2,017.
With bills now expected to increase to more than £4,200 in January, Labour said the disparity will widen, leaving prepayment customers paying an additional £100 between January and March alone.
And the sums involved could be even larger, with energy consultancy Auxilione forecasting that the cap could hit £4,467 in January and an eye-watering £5,038 in April – more than £200 higher than previous predictions.
Labour said it would reimburse energy suppliers the estimated £113m cost of equalising the caps between October and March with cash raised from a strengthened windfall tax on North Sea oil and gas companies.
Ms Reeves said: “It’s outrageous that people on prepayment meters have to pay more for their energy. Why should those with the least have to pay more to heat their homes and put the lights on?
“As energy prices spiral, this unfair prepayment premium must end. Labour would make sure that no one pays over the odds for the same gas and electricity than everyone else gets, as well as taking broader action to help people manage their bills over the winter”.
The Labour proposal was welcomed by anti-poverty campaigners, but a leading think tank said it would go only a small way towards softening the blow of soaring energy bills on the poorest households.
Katie Schmuecker, principal policy adviser with the Joseph Rowntree Foundation, told The Independent that equalising the price caps would “help correct the long-standing injustice of people on the lowest incomes paying more for their energy”.
