Full Fact has new analysis out this morning showing Labour’s policy of freezing the energy price cap at current levels has a multi-billion costings black hole at its heart. Their analysis says freezing the cap would cost around £8 billion more than Labour calculates, as they haven’t taken into account most consumers’ higher gas and electricity consumption during a typical winter. The fact-checking website previously said Labour’s “fully-funded” plan was out by around £2 billion. Now the IFS has flagged another problem…
The IFS told Full Fact:
“Energy use rises enormously over the winter months, and, as they stand, Labour’s plans would not cover the cost of freezing prices for the additional energy consumed by households over this period.
The roughly £8 billion of costs the plan does not currently cover would either need to be paid for by the government, energy suppliers or households.”
This £8 billion figure is in addition to previous IFS criticism that Sir Keir’s radical plan is an “illusion” as the party factored in £7.2 billion of savings from debt interest payments due to the lower inflation the freeze would cause. Obviously the moment the freeze was ended – as it would have to at some point – inflation would rise again and wipe out those savings.
The party also factored in £2 billion towards the policy from “not going ahead with either of the two proposals from the Conservative leadership candidates: cuts to green levies, proposed by Liz Truss, or cutting VAT, proposed by Rishi Sunak.” Given neither of these proposals are current government policy, deciding not to implement them saves precisely £0.
Labour’s had all summer to come up with one policy while the Tory Party tears itself apart, and it has around £17.2 billion of questionable sums behind it. Labour’s response has been to attack the fact-checking website, telling Politico “Full Fact don’t understand how energy bills work”…
Ofgem has, as expected, raised the energy price cap from £1,971 to £3,549 a year, starting in October. They ominously add:
“Although Ofgem is not giving price cap projections for January because the market remains too volatile, the market for gas in Winter means that prices could get significantly worse through 2023.”
Ofgem chief Jonathan Brearley says “it’s clear the new Prime Minister will need to act further”.