Chancellor Rachel Reeves hit out at a Tory government-era energy support package that cost around £40bn in a further indication that any Labour scheme would only be for the poorest households.
In an address to the House of Commons, Reeves said there were “contingency plans” being drafted for different scenarios where energy prices stay higher for longer.
She said she was bolstering the Competition and Markets Authority’s powers to “crack down” on companies’ profiteering though did not reveal whether the government would unveil a mulit-billion pound support package.
Reeves told MPs that previous subsidies for the whole British public “left us with higher levels of national debt” as she emphasised that her fiscal rules remain “iron-clad”.
She highlighted blanket subsidies that she claimed gave households in the top income decile an average of £1,350 of support on energy bills.
“That left us with high levels of national debt, a cheque written then for a bill that is still being paid today,” Reeves said.
“I can confirm to the House that contingency planning is taking place for every eventuality, so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.
“This is not a war that we started, nor is it a war that we joined, unlike the advice of the parties opposite.”
Her comments appeared to clarify Sir Keir Starmer’s suggestion that the government could not afford a package equivalent to that announced under the Tories as he said he was “acutely aware of the state of public finances“.
Shadow chancellor Sir Mel Stride hit back at the Chancellor as he said any energy support scheme would be paid by higher taxes for households.
“This support will, of course, under this government be funded through the taxes of hard-working people,” Stride said.
“She knows it, the country knows it, and now we must all brace ourselves for what is to come.”
Reeves aims to fast-track growth reforms
Labour’s efforts to boost the UK economy will also be fast-tracked, Reeves promised. This will include the introduction of legislation for nuclear energy deregulation proposed in the Fingleton Review and an aim to conclude food and agricultural trade negotiations with the EU by the end of the year.
Senior ministers now face a race against time to come up with measures to relieve pressures on household finances, with the energy price cap reset in July covering higher oil and gas prices seen after the start of the war in the Middle East.
Fuel prices at petrol pumps have already soared by around 20 per cent, according to research by the RAC.
Economists said on Tuesday that higher prices and dampened business confidence was already taking a toll on growth and pushing up near-term inflation.
An estimate for S&P Global’s purchasing managers’ index, a leading data point used by policymakers to analyse trends in the UK economy, dropped to a six-month low,
Thomas Pugh, the chief economist at the consultancy RSM, said the UK economy was “in for another bout of stagflation”.
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