Cost of living crisis: Energy price cap rise could be cancelled by UK Government. And here's how to do it – Alex Cole-Hamilton MSP
Families and pensioners across the country are already in the grip of a cost-of-living crisis but they will be looking towards this winter with real fear.
After energy bills rose by £700 this year, we simply cannot afford another, even bigger increase of £1,400 in October.
Conservative ministers have barely lifted a finger to help families and pensioners with soaring energy bills and right now, the UK is heading for a recession because people have no money to spend. If we don’t stop this coming energy price rise, we’ll be doing more damage to our economy and people will die for want of heating.
This is an emergency, and the government must step in to help UK households by cancelling the planned rise in energy bills this October and preventing a further uplift in January.
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Ofgem is due to announce the energy price cap for October to December on August 26. This sets the rates that energy suppliers can charge their customers, which will come into effect on October 1. The price cap is currently £1,971 a year for a typical household. It went up by £693 in April. The new cap is expected to be around £3,400, an increase of around £1,400 or 70 per cent.
Under Lib Dem plans, Ofgem would not increase the price cap. Instead, the government would pay suppliers the shortfall of what they would’ve been charging if the cap had increased, so they can afford to continue supplying their customers.
The government could meet the £36 billion cost of these measures in a number of ways.
First, the UK Government should expand the windfall tax on oil and gas companies’ record profits. A meaningful windfall tax could raise around £20 billion to help keep people’s energy bills from rising in October.
Fossil fuel giants have seen their profits soar: BP and Shell made £29 billion in profits in the first six months of the year alone. It’s time they paid their way.
Second, the UK Government should use the extra VAT revenues it is receiving as a result of inflation. The Treasury took in £11 billion more in VAT last financial year than it was expecting, and is now projected to take in an extra £9 billion this year and £10 billion next year compared to last year’s forecasts. That’s a £30 billion VAT windfall that the government should be using to help families and pensioners.
On top of this, UK Government borrowing is set to come in at around £21 billion below forecast this year, and £35 billion below next year, so there’s headroom for a one-off emergency measure to borrow further to support a move like this without adding to the national debt in the long-term.
We live in extraordinary times. We’ve just come through a global pandemic and now face war in Europe for the first time this century. Extraordinary times call for extraordinary measures.
Think of this like the furlough scheme. At times of great economic hardship, like in the early days of the pandemic, it’s right for government to step in and bail its citizens out.
Tinkering around the edges or giving tax breaks to multinational companies as the two Tory leadership candidates seem fixated with won’t heat people’s homes.
Alex Cole-Hamilton is Liberal Democrat MSP for Edinburgh Western