Labour calls for Parliament to be recalled over energy bills

Labour called for Parliament to be recalled on 18 August 2022 in order to freeze energy bills¹. The plan, announced by the party leader Sir Keir Starmer on 14 August, proposes that the government should freeze domestic energy bills at the level set by the April 2022 price cap until the end of March next year, instead of allowing them to rise in October 2022 and January 2023¹.

Labour's announcement says: "Stopping energy bills from rising is a fully-funded measure, with a total cost of £29bn"¹. The party says the plan would cost a total of £28.9 billion, made up of £14.7 billion for direct debit customers, £5.4 billion for standard credit customers, £5.3 billion for pre-payment meter customers, £2.6 billion for off-grid customers and £0.8 billion for households in Northern Ireland¹.

Full Fact's analysis suggests the plan contains a shortfall of around £5 billion for direct debit customers alone, and an additional shortfall for other types of customer¹. It says the additional cost of their consumption during the winter would add about another £5 billion to the plan, or roughly £340 per household¹. The Institute for Fiscal Studies (IFS) estimated separately that the total cost when accounting for all customers would be around £8 billion higher¹.

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"¹. It added: "The roughly £8bn of costs the plan does not currently cover would either need to be paid for by the government, energy suppliers or households"¹.

According to industry forecasts cited in Labour's policy document, the annual cost for a typical household paying for both gas and electricity by direct debit is expected to rise from £1,971, as set by the April price cap, to £3,582 in October and then £4,266 in January 2023¹. Direct debit customers would expect to pay, on average, £134 more per month from October to December and £191 more per month from January to March, compared with their current bill¹.

Ofgem estimates that a typical household in a year uses around 2,900kWh of electricity and around 12,000kWh of gas, and around 56% of this electricity and 76% of this gas is used in the period from October to March¹. Labour told Full Fact that its figures account for the energy expenditure of different types of customers, and that this was why it had accounted for seasonal differences in bills for customers who use pre-payment meters, but not those who pay by direct debit or standard credit, whose bills are designed to be the same each month¹.

Why it matters for households

The plan is intended to stop domestic energy bills rising between October 2022 and March 2023¹. Under the forecasts in Labour's own document, the typical household's annual bill would rise from £1,971 to £3,582 in October and £4,266 in January 2023 without a freeze¹. Full Fact says that under Labour's plan households would still pay more for energy used this winter because of the rising price cap, unless the government provided roughly £8 billion more funding or required the energy companies to absorb the cost, which Labour has not proposed to do¹. The IFS said the roughly £8bn of costs the plan does not currently cover would either need to be paid for by the government, energy suppliers or households¹.

What happens next

On 26 August 2022, Ofgem will announce the October 2022 price cap¹. Full Fact notes that it, and the January cap to follow, may not be the same as Labour's forecasts assumed, which would mean that the actual costs of the plan would be different too¹. After Full Fact published its fact check, it contacted Labour to request clarification regarding the claim; Labour did not respond¹.