Labour calls for North Sea windfall tax to rein in soaring energy bills

Move would save average household £200 and poorest £600, says Rachel Reeves

Labour has called for a windfall tax on North Sea oil and gas to help cushion the impact of an expected £600 rise in household energy bills this spring.

Shadow chancellor Rachel Reeves announced measures which would save most households £200 and protect the poorest almost entirely from the financial hit forecast when the energy price cap is reviewed in April.

Energy sector analysts expect the review to result in a leap in the average annual bill for gas and electricity from £1,277 to around £1,865, adding to a cost-of-living crisis caused by 5 per cent inflation and a looming hike in national insurance contributions.

Ms Reeves accused the Conservative government of a “decade of dither, delay and poor planning” on energy, pointing to a failure swiftly to develop nuclear and renewable alternatives or to insulate homes, and inadequate regulation which she blamed for dozens of power companies going bust.

Under the Labour plans, there would be a 12-month holiday from VAT on domestic energy bills, saving 28.5 million households an average £89 at a cost of £2.5bn to the Treasury.

Labour would spend an additional £3.5bn a year on the warm homes discount, increasing the one-off annual payment from £140 to £400 and extending eligibility to around 9.3 million households – one-third of the British total.

All working families with children claiming universal credit, as well as 220,000 pensioners with some savings, would be brought into the scheme, which currently goes only to the least well-off.

And Labour would provide loans to energy companies to cover the £2.6bn cost of taking on customers from failed suppliers, which would otherwise be charged to bill-payers at an estimated £94 per customer. A £600m contingency fund would be used to support energy intensive businesses.

The total £6.6bn bill for the package would be covered by a one-off £1.2bn windfall tax on North Sea companies which have reaped unexpected profits from the recent surge in energy prices, as well as by allocating additional VAT payments of £3.1bn and oil and gas tax receipts of £2.3bn.

In addition, the shadow chancellor said Labour would:

• Cut Britain’s reliance on imported gas by accelerating home-grown renewables and new nuclear.
• Make sure 19 million homes are warm and well-insulated, saving households an average of £400 a year on bills.
• Improve regulation of the market, with a pledge to never again let energy companies “play fast and loose with the rules”.

Ms Reeves said: “There is a global gas price crisis, but 10 years of the Conservatives’ failed energy policy, and dither and delay has created a price crisis that’s being felt by everyone.

“We want to stop bills going up.

“That’s why Labour would give families security by taking fully funded measures to save most households around £200 or more, targeting extra support on top of that for the squeezed middle, pensioners, and lowest earners.

“But we need more than a short-term fix.

“Labour’s plan to keep energy bills lower in future would see us accelerate home-grown renewables and new nuclear, retrofit 19 million homes to save households an average of £400 a year on their bills, and reform our broken energy system to stop energy companies playing fast and loose with the rules.

“The Tories have been asleep at the wheel, with hard-working people paying the price. Labour has a plan to fix this.”

Shadow climate change secretary Ed Miliband said the package would protect consumers while allowing the UK to make the “green transition” away from fossil fuels.

It was “entirely right” that the energy producers which have benefitted from the price spike should be asked to pay “their fair share”, he said.

The Labour move follows an earlier Liberal Democrat call for a Robin Hood tax on North Sea companies to alleviate fuel poverty.

Party leader Sir Ed Davey released figures showing 130,000 people in fuel poverty in cabinet members’ constituencies, including some of the Blue Wall Tory seats which Lib Dems are targeting following their victories in Chesham & Amersham and North Shropshire.

These included 7,896 fuel poor households (17 per cent of the total) in foreign secretary Liz Truss’s South West Norfolk, 7,037 (14.9 per cent) in chancellor Rishi Sunak’s Richmond in Yorkshire, 5,392 in Boris Johnson’s Uxbridge and South Ruislip and 2,590 in deputy prime minister Dominic Raab’s Esher & Walton.

“Cabinet ministers are turning a blind eye to families in their own backyard struggling with soaring heating bills,” said Sir Ed.

“There is a growing revolt in the Conservative heartlands against Boris Johnson’s government, and their failure to help people with the cost of living crisis is only making it worse.

“We need an urgent package of support now to help people cope with the cost of living crisis. That should include Liberal Democrat calls for a Robin Hood tax on oil and gas firms seeing record profits, raising enough cash to give over 7 million households £300 off their heating bills this year.”