Britain needs a pandemic-style bailout for household energy bills

If Covid was like a tremendous earthquake hitting the globe, these spiralling energy costs are one of its aftershocks – and we should take them just as seriously

When I showed my support for striking rail workers last week, I did so because at a time of worsening national crisis, it’s the trade unions that are standing up for working people – and Labour must be the party that stands with them, wherever they are defending their standard of living.

Now isn’t the time for the Labour Party to turn against its own supporters and the people the party was set up to defend. It’s not too late for the leadership to change course, but I fear as things stand they will simply be blown over by the scale of the cost of living crisis.

At its heart, the crisis is simple. Wages are too low and prices are too high. The culprit responsible for this situation is obvious, but too often ignored. Profits for the 350 biggest listed companies in Britain today are 73 per cent higher than they were before the pandemic. Research for the trade union Unite has shown that these high profits account for 60 per cent of the increase in prices since the start of the year.

For all the talk about a “wage-price spiral” from some, including the prime minister – who may not know better – and the Bank of England governor – who should know better – wage rises over the same time period account for just 8.3 per cent.

Wages are not keeping pace with prices. And big companies are taking the difference in higher prices but flatlining wages as higher profits. This isn’t a “wage-price spiral” but a “profit-price spiral”. Workers are well within their rights to take action to defend their standard of living and against an obvious injustice. Labour should be right there with them.

But pay is only one side of the crisis. Current predictions are for the energy price cap to rise by over 70 per cent in October, taking the typical household bill from £1,500 at the start of the year to more than £3,000 by the end. This simply isn’t going to be affordable for millions of people. Charities have warned that one in three people will be in fuel poverty by December – forced to choose between eating and heating their homes.

Faced with this catastrophe, it’s no wonder 75,000 people have now pledged not to pay their energy bills this autumn. As Martin Lewis has been warning for weeks, there is a real risk of mass, civil disobedience this autumn of a kind this country hasn’t seen since the poll tax, when millions of people refused to pay what they saw as an unfair amount.

I can’t support people breaking the law. But I understand why people facing energy bills they simply cannot afford to pay may well feel they have no choice. The anger is already palpable and it will only deepen as the increased bills arrive over the next few months.

The whole labour movement – the Labour Party and the trade unions – should be demanding that the government introduces a furlough-style bailout for household energy bills this autumn. If Covid-19 was like a tremendous earthquake hitting the globe, these spiralling energy costs are one of its aftershocks – and we should take them just as seriously. The International Monetary Fund has suggested it would cost about £30bn to fully compensate the poorest 40 per cent of households for price rises this year – still a fraction of furlough costs, and matching Liz Truss’s pledged tax cuts.

Governments shouldn’t be afraid to borrow in an emergency, but it’s obvious where the money could come from. Shell and BP made £40bn profit between them last year. Every single penny of their extreme profits is being squeezed from the rest of us across the globe, whether on the morning commute or keeping our lights on at home.

Looking ahead, the domestic energy price cap needs urgent reform. The principle of protecting people from energy price hikes is a good one – but that means actually protecting people, not these six-monthly jumps in household bills. Other European countries, from France to Norway, have brought in price caps with bite, and our government should bring forward similar proposals.

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If we have to take part, or all, of the privatised energy system back into public hands to deliver a fair deal for households and businesses, then so be it. When even free market Tories like Iain Martin are talking about nationalising the energy companies, Labour has no excuse for not making the same case.

Let’s not kid ourselves that the Tories, potentially with a new leader seemingly unafraid to talk about borrowing big and ripping up the “sound money” rulebook, won’t move quickly on this in September. Labour risks being left in the lurch, the same way it was when Rishi Sunak introduced his own energy windfall tax. What ideas on tackling the crisis has Labour brought forward since?

Labour needs to remember why it was set up, and who for. It’s time for the Labour Party to do what it should always do: stand with working people in a time of crisis. There is no easy path back to government for us but if our people don’t see us fighting alongside them today, they won’t be putting Keir Starmer in Downing Street tomorrow.

Sam Tarry is the Labour MP for Ilford South