The Guardian’s view on Keir Starmer’s bill freeze: Smart politics needs smart economics | Editorial

IIn the eye of the cost of living storm, Sir Keir Starmer correctly judged that Labor needed to be bold. His policy of freezing energy bills at their current level until next spring reveals that he is a politician capable of seizing the agenda when the opportunity arises. The public has become unnerved by the prospect of household energy bills of £5,000 a year in April 2023, more than quadrupling in just 18 months. Such amounts risk causing an unacceptable increase in fuel poverty and hardship this winter. By calling for price hikes to be halted, Sir Keir did the right thing at the right time.

The Labor leader tells the public they shouldn’t pay more than they currently do for gas and electricity – and that the government will step in to pay the rest of the tab if wholesale prices continue to rise increase. It’s smart politics. It creates a sharp dividing line between the two main parties: Both Tory leadership candidates – Liz Truss and Rishi Sunak – have rejected the bill freeze outright. It also puts Labor on the side of the common people, while the policies of the prime minister candidates are either unimaginative or designed primarily to appeal only to a wealthy and elderly slice of the electorate. Three out of four Tory voters support Labour’s energy billing plan. Even energy companies have suggested a version of Labour’s offer, with industry offering to voluntarily suspend customer bills for two years and spread the cost of the gas price crisis over a decade or more.

Sir Keir’s intervention is important as he recognizes the need to stabilize energy prices and reduce inflationary pressures through price caps combined with investments to increase the resilience of the economy. His policy is not cheap, costing the state around £30billion. Gasoline prices, which fuel energy costs, are not expected to drop significantly in the near future.

Extend household energy bill freeze for another year, says industry expert Simon Evans, would cost an additional £44 billion. Perhaps even more alarming is that households have historically only accounted for around half of the UK’s national energy expenditure. Isolating everyone – schools, hospitals and industry – would require a Covid-style spending spree. It seems inconceivable to suggest that such sums could be collected from households or businesses. Labor has already suggested a windfall tax on North Sea energy producers, which is the right thing to do. However, the bulk of the money is earned outside the scope of such a policy by entities such as the Norwegian state energy company.

The energy market is broken. Nearly 30 UK energy suppliers collapsed, affecting 4 million customers in the year to May. Even before the onset of the current crisis, the majority of energy suppliers in Britain were loss-making. It’s hard to see how a carbon-free energy grid is going to be built from such a system. Sir Keir is reluctant to be fired at what Labor policy would be after six months. But achieving national strategic objectives will require a government capable of directing investments.

Former Labor Prime Minister Gordon Brown understands this – arguing that businesses may have to be run by the public sector if they fail to enact state priorities. Many companies have a vested interest in extending the life of natural gas assets because they own them. Gas is an essential transition fuel, destined to be phased out and replaced with greener supplies. But that will require the government to be in the driver’s seat. Fortuitously, a combination of austerity, exhaustion, Covid and high inflation created an appetite for state activism. Having grasped the magnitude of the crisis, Sir Keir must now seize the moment for the good of the country.

About Timothy Ball

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