Cost of living: Keir Starmer says he would work with next prime minister to tackle soaring bills

Labour leader Keir Starmer said he will work with the next prime minister to help households who will face "awful price hikes".

Sir Keir Starmer has said he would be willing to work with the next prime minister to help tackle the cost of living crisis as predictions for skyrocketing prices fuel anxiety.

He said that while the two candidates to be the next leader of the Conservative party were "slugging out without any credible plans", he would be willing to talk to the incoming PM.

"My focus is on the millions of households who will really struggle if real action isn't taken in the coming weeks and months," he told ITV News.

'I'll work with anyone to try and alleviate the situation'

Sir Keir said: "I will work with anyone to ensure that those households who are going to face these awful price hikes get an answer to their question which is 'what are you going to do to help me?'"

He added: "I know first-hand how anxious they are, so I'll work with anyone to alleviate that situation."

The Labour leader said he would use a windfall tax to freeze households' soaring energy bills as he set out the party's £29 billion emergency plan to stop energy bills rising over the winter.

Sir Keir said that under his party’s “fully-funded” proposals, consumers would not pay “a penny more” for their gas and electricity over the coming months, which he claimed would save the average household £1,000.

The proposals are backed by three in four Tory voters, according to YouGov polling for The Times.

'We have a choice. We either allow the oil and gas companies to make huge profits whilst every family suffers, or we do something about it,' says Keir Starmer

It comes as energy consultancy Cornwall Insight updated its latest energy bills predictions, warning they are forecast to soar again to around £4,266 for the average household in the three months from the beginning of January.

The firm's analysts also predicted further rises in 2023, warning the cap could reach £4,427 from the start of April.

Its latest outlook for households came ahead of Ofgem's expected energy bills price cap hike, which is predicted to trigger a rise to £3,582 per year for the average household from the beginning of October, from £1,971 now.

Sir Keir said his plan was a direct response to a “national economic emergency” which had left millions of families across the country fearful as to how they would cope.

'We are saying we won't allow those price increases to go ahead'

However, the Institute for Fiscal Studies (IFS) questioned Labour’s explanation as to how it would fund the support package, saying some of its proposals were an “illusion."

The think tank’s director Paul Johnson said the party’s plan to cancel the energy price cap rise – if extended from the proposed six months to a year – would cost as much as the Covid furlough scheme.

He warned that inflation would quickly pick up again once the subsidies ended meaning there would be another crisis in April when wholesale gas prices are still predicted to be extremely high.

Sir Keir told ITV News he had heard the IFS's criticism and that Labour would come up with a further plan to address the issues that could arise in April.

He said the "real answer" is to improve home insulation and to reduce dependence on the international energy market over the medium and long term.

'I'm not going to apologise for going on holiday with my wife and kids'

Sir Keir also defended taking a holiday at the start of the month as the cost of living crisis escalated.

He said he had tasked his team to produce this plan "six or seven weeks ago."

He also told ITV News: "I've got an important job as leader of the Labour Party and leader of the opposition but I've got another important job and that's as a dad and I'm not going to apologise for going on holiday with my wife and kids."

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What is Keir Starmer proposing?

As well as freezing the energy price cap at its current level of £1,971 for the average household, Sir Keir said a Labour government would insulate 19 million of the coldest homes over the next decade, further reducing bills.

The party said scrapping the planned increases in the price cap would cut inflation by 4%, making future interest rate rises less likely.

It said the price freeze would mean that it would not go ahead with the £400 rebate on energy bills that the government has promised all households in October to soften the impact of rising prices.

Sir Keir said Labour was also committed to measures to increase the UK’s energy security, doubling onshore and offshore wind capacity, investing in solar, tidal and hydrogen, and bringing forward new nuclear capacity.

Sir Keir said: “Britain’s cost of living crisis is getting worse, leaving people scared about how they’ll get through the winter.

“We’ve had 12 years of Tory government that has failed to prepare and refused to invest, leaving bills higher and our country less secure.

“This is a national emergency. It needs strong leadership and urgent action."

How would Labour's proposal be funded?

In order to pay for the measures proposed by Sir Keir, Labour said it would close a “loophole” in the levy on the profits of the energy companies announced by Rishi Sunak in May when he was chancellor, and backdate the start to January, which together with rising global prices would bring in £8 billion.

Labour said £14 billion would come from other measures such as dropping the £400 energy rebate and abandoning pledges made by the Tory leadership contenders – such as halting the “green levy” on fuel bills, which Liz Truss is proposing, or scrapping VAT on domestic fuel bills which Mr Sunak has promised.

And by keeping inflation down, which Labour said would peak at about 9% rather than the 13% the Bank of England is forecasting, the party said it would reduce the government’s debt interest payments by another £7 billion.

What is the next prime minister proposing?

Sir Keir's intervention will increase the pressure on the contenders for the Tory leadership – Truss and Sunak – to spell out how they would help families struggling with soaring bills, if they become prime minister.

But what has each of the leaders promised to do?

Tory leadership contenders Rishi Sunak and Liz Truss have both said they want to reform the civil service. Credit: PA

Rishi Sunak

Considered the underdog in the race for No. 10, the former Chancellor has committed to removing the 5% VAT on energy bills for 12 months from October.

The IFS says this would provide an average saving of around £154 on all domestic energy bills.

Mr Sunak's team have valued the cost of the VAT cut at about £5bn a year. He has also pledged to give households emergency support payments, expanding the schemes that are currently in place, such as the £400 rebate which he introduced as Chancellor in May.

Liz Truss

Ms Truss has refused to offer "handouts" as part of her proposals to tackle the cost of living crunch, instead focussing on lowering taxes.

The foreign secretary told the Financial Times she would of course “look at what more can be done” when it came to spiralling fuel bills but said she would do things in a “Conservative way”.

At a Tory leadership hustings in Eastbourne, Sussex, earlier this month, Ms Truss suggested her plans for immediate tax cuts could avert a recession.

The foreign secretary has pledged to halt “green levies” on energy bills, reverse the national insurance hike and cancel the planned corporation tax rise.

She told Tory members: “I know there are difficult forecasts out there but forecasts are not destiny. And what we shouldn’t be doing is talking ourselves into a recession. We should be keeping taxes low."