Liz Truss and Laura Kuenssberg clash over interest rates
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Labour has said it would match the two-year freeze on the cost of energy bills announced by the new Conservative Government, but the party’s shadow Chancellor has struggled to explain how it would be funded. Liz Truss’s announcement last week that the cost of gas and electricity would be fixed as of October 1 into 2024 was widely welcomed as much-needed relief from soaring cost of living.
However, alongside the wide-reaching tax cuts announced by her Chancellor, Kwasi Kwarteng, it has been criticised for relying on a large amount of borrowing – something which the Government has defended as necessary in a time of crisis.
In August, Labour leader Sir Keir Starmer announced his own support plan, capping prices at £1,971 for six months, at an estimated cost of £29billion.
The Tories’ plan will cover two years, with prices fixed around £2,500 a year, and is expected to cost at least £100billion.
But today, Rachel Reeves, Labour’s finance representative, revealed that the party agreed with the longer-term extension to the freeze that the Government had announced.
She told the BBC’s Laura Kuenssberg: “We welcome the fact that the Government has come forward with their own package and we support that support for the two-year period.
“The difference between us and the Conservatives is that we would fund part of that package by an extension of the windfall tax on North Sea oil and gas companies.”
Labour’s original plan relied on an £8billion additional windfall tax on oil and gas companies, but also £7billion from reducing inflation and further funds from reversing Tory decisions.
Ms Truss, a former Shell employee, ruled out a levy on energy companies during the campaign for Tory party leader in the summer.
Ms Reeves was grilled on how Labour would go about covering the cost of a similar freeze over a period of time that was four times longer than the opposition party had initially anticipated.
Ms Kuenssberg noted the vast difference between £8billion from the windfall tax compared with as high as a £120billion bill for the freeze, and asked: “How are you going to come up with the rest of it?”
Ms Reeves said that Labour would increase the income from the windfall tax by back-dating it to January this year, which she said would bring in “tens of billions of pounds”.
But Ms Kuenssberg shot back that even if the tax were doubled – to £16billion – there was still a shortfall of possibly well over £100billion.
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Ms Reeves responded that the windfall tax would later be expanded to include “all energy generators beyond just oil and gas” companies.
Similarly, she said that Labour would extend the tax over a longer period of time.
The shadow Chancellor argued Ms Truss had sparked a “mad experiment” with the Government’s fiscal announcement, and claimed that the “sheer scale” of borrowing needed for it was behind the market turmoil that had followed it.
Her remarks come after a YouGov poll this week gave Labour a 33-point lead over the Tories – the highest the party has achieved since the 1990s – with the Tories reduced to just 21 percent of voting intentions.
It came in the aftermath of Mr Kwarteng’s mini-budget, which shook the markets and saw the pound slump against the dollar. A spiral in the gilt market earlier this week led the Bank of England to make a £65billion intervention.
When Labour’s energy plan was announced in the summer, Sir Keir said it was “fully funded”.
But Full Fact said at the time that the £29billion price tag “would not fully cover the expected rise in the energy price cap, because it doesn’t take account of most customers’ higher gas and electricity consumption during the winter”.
The fact-checking organisation, citing analysis by the Institute of Fiscal Studies, said freezing the price cap would cost a further £8billion.
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