As Energy Prices Are Set To Soar To £4,000, What Are Politicians Proposing To Do About It?

·6-min read
The energy price cap, which currently stands at £1,971, is set to increase to £3,582 in October and again to £4,000 in January. (Photo: Xinhua News Agency via Getty Images)
The energy price cap, which currently stands at £1,971, is set to increase to £3,582 in October and again to £4,000 in January. (Photo: Xinhua News Agency via Getty Images)

The energy price cap, which currently stands at £1,971, is set to increase to £3,582 in October and again to £4,000 in January. (Photo: Xinhua News Agency via Getty Images)

Last week saw the grimmest development yet for people struggling with the cost of living crisis, with experts predicting that already-unaffordable energy bills could reach an eye-watering £4,000 in January.

Energy bills, which have already risen as a consequence of Russia’s invasion of Ukraine, are set to soar further as the ongoing conflict puts a squeeze on supplies throughout Europe.

The energy price cap, which currently stands at £1,971, is set to increase to £3,582 in October.

The forecasts have prompted a sense of panic and a national conversation about what should be done to help people who may find themselves unable to pay their bills in the winter.

Here HuffPost UK takes you through what the main parties and figures are proposing and how their ideas have been received.

Liz Truss

Liz Truss has hardened her stance against a further windfall tax, dismissing the policy as “bashing business”. (Photo: Ian Forsyth via Getty Images)
Liz Truss has hardened her stance against a further windfall tax, dismissing the policy as “bashing business”. (Photo: Ian Forsyth via Getty Images)

Liz Truss has hardened her stance against a further windfall tax, dismissing the policy as “bashing business”. (Photo: Ian Forsyth via Getty Images)

The frontrunner in the race to replace Boris Johnson has emphasised tax cuts as the main way she would help people struggling with bill hikes.

The foreign secretary has vowed to immediately reverse the 1.25 percentage point increase in national insurance as well as temporarily scrap green levies on energy bills.

In a recent interview with the Financial Times, Truss said she would hold an emergency budget to outline a new approach to the problem, which she said she wanted to be in the “Conservative way of lowering the tax burden, not giving out handouts”.

That prompted a U-turn of sorts by Truss who said that despite criticism, she was not ruling out further direct support for households completely.

She is said to be considering proposals from the Treasury that could see the price cap fall by scrapping a new allowance suppliers will be allowed to charge families in the winter, in a move that could reduce bills by a further £400.

Instead the shortfall would be made up by the government providing loans to suppliers. However, it is too late to have an effect in October, when the cap is expected to rise once again.

Simon Clarke, a key ally of Truss, also suggested she could tweak the £400 already destined for all households in October so it doesn’t benefit the highest earners but is targeted at the least well-off.

Last week, analysis by the Tony Blair Institute found that Truss’s national insurance reversal would save the poorest families just 76p a month on average while the most wealthy households would benefit from by £93 a month from the policy.

Truss’s leadership rival, Rishi Sunak, also attacked her plan to scrap green levies, saying it would only claw back £150 a year.

Truss has also hardened her stance against a further windfall tax on energy giants, dismissing the policy as “bashing business”.

Rishi Sunak

Sunak has indicated he would expand existing support schemes when the price cap rises again in the winter. (Photo: Ben Birchall - PA Images via Getty Images)
Sunak has indicated he would expand existing support schemes when the price cap rises again in the winter. (Photo: Ben Birchall - PA Images via Getty Images)

Sunak has indicated he would expand existing support schemes when the price cap rises again in the winter. (Photo: Ben Birchall - PA Images via Getty Images)

The former chancellor has committed to scrapping VAT on energy bills for a year and has also said he will expand the emergency support schemes already in place.

So far that scheme includes £650 off for the lowest income households, £300 off for eight million pensioner households, £150 off for those receiving non-means tested disability benefits and a £400 energy grant for every household.

In an article for the Times, Sunak said if he is elected PM he would extend the scheme that knocks £400 off bills for every household, rising to £1,200 for pensioners and those on benefits.

He also said he would “drive a programme to identify savings across Whitehall” in order to pay for expanding the help on offer, which The Times said would cost around £10 billion.

Sunak signalled the government could need to raise more revenue from the energy profits levy — the so-called windfall tax —and also refused to rule out “some limited and temporary one-off borrowing as a last resort to get us through this winter”.

According to the Institute of Fiscal Studies, removing VAT on bills would cost £4.3 billion to implement and would provide households with a relief of about £154 on their energy bills.

Labour

(Photo: Finnbarr Webster via Getty Images)
(Photo: Finnbarr Webster via Getty Images)

(Photo: Finnbarr Webster via Getty Images)

After initially facing criticism for being absent as the new energy projections were revealed, Keir Starmer has offered what he calls a “radical” response to the cost of living crisis.

The Labour leader has vowed to freeze the energy price cap at its current level of £1,971 for six months, meaning households “won’t pay a penny more” on their energy bills.

The scheme would cost £29 billion and would be funded by increasing the windfall tax on energy firms’ massive profits by backdating it to January, in a move that would raise £8 billion.

The party argues that reducing energy bills would also have a knock-on effect on inflation which would lead to cut in government debt interest payments of £7bn.

The government’s current plan to offer £400 off energy bills for every household would be ditched as a result.

Responding to the proposals, the Paul Johnson, the director of the thinktank the Institute for Fiscal Studies, said inflation will continue to climb unless Labour continues to subsidise energy bills beyond the six-month period it has suggested.

He also told BBC Radio 4′s Today programme that Labour’s plan to cancel the rise in energy price cap would be “looking at the cost of furlough” if extended from six months to a year.

The Liberal Democrats

Ed Davey said Liz Truss and Rishi Sunak were Truss
Ed Davey said Liz Truss and Rishi Sunak were Truss

Ed Davey said Liz Truss and Rishi Sunak were Truss "more interested in speaking to their party than taking the action our country needs". (Photo: Finnbarr Webster via Getty Images)

Liberal Democrat leader Ed Davey called on the government to cancel the price cap rise in October to help people save hundreds of pounds off their energy bills.

Davey said energy suppliers could supply customers with their current rates if the government covers the shortfall to allow them to do so.

The Lib Dems said the policy would cost £36 billion and said the windfall tax on oil and gas company profits should be increased to help cover it.

...And former PM Gordon Brown

Gordon Brown criticised the Tory leadership candidates, saying: “Time and tide wait for no one. Neither do crises. They don’t take holidays, and don’t politely hang fire – certainly not to suit the convenience of a departing PM and the whims of two potential successors.” (Photo: Jeff J Mitchell via Getty Images)
Gordon Brown criticised the Tory leadership candidates, saying: “Time and tide wait for no one. Neither do crises. They don’t take holidays, and don’t politely hang fire – certainly not to suit the convenience of a departing PM and the whims of two potential successors.” (Photo: Jeff J Mitchell via Getty Images)

Gordon Brown criticised the Tory leadership candidates, saying: “Time and tide wait for no one. Neither do crises. They don’t take holidays, and don’t politely hang fire – certainly not to suit the convenience of a departing PM and the whims of two potential successors.” (Photo: Jeff J Mitchell via Getty Images)

Perhaps the most radical response to the energy crisis has come from former Labour leader Gordon Brown, who is no stranger to navigating the country through a crisis.

Brown, who was prime minister during the 2008 financial crash, said the government should take a similar approach to the one he took with banks and renationalise those that fail to bring down prices for customers. 

Under Brown’s plan, the energy price cap would be scrapped and new, lower prices would be negotiated with energy giants, who are all raking in bumper profits as gas prices surge.

If firms fail to bring prices down, the government should consider bringing them into public ownership“as a last resort ... until the crisis is over”.

This article originally appeared on HuffPost UK and has been updated.

Related...