Keir Starmer’s energy price policy is a shrewd opposition tactic

Rishi Sunak made an elementary mistake in the Conservative leadership campaign by setting out what he would do if he were still in government to deal with the worsening crisis of rising energy prices.

His plan was sensible and compassionate and is close to what Liz Truss will do when she becomes prime minister, as she is now gradually admitting, now that most Tory members have already voted. But Truss avoided saying what she would do for the first few weeks of the campaign, except that she was in favour of tax cuts and against handouts.

That was what Tory members wanted to hear, and they happily cast their votes accordingly. So now it is safe for Truss’s allies to brief journalists that she is likely in No 10 to target most help on the poor, using the benefit system, just as Sunak said in the first place. Anyone who thought that by “handouts” she meant benefits, including universal credit and pension credit, will have to think again.

Keir Starmer has observed Truss’s sharp practice and learned. His plan to fix energy prices is what the voters want to hear, and has suddenly restored the mantle of credible opposition to Labour. It is not what Labour would do if it were in government, because it is so hugely expensive, but it sounds great and it gives the party a strong enough base from which to berate the new prime minister for not doing enough.

The cost of the scheme is not the only reason any government would shy away from legislating for it in practice. It also falls victim to the paradox of universalism, which is that any subsidy for everyone goes to people who “don’t need it”. Worse than that, a blanket subsidy to fix the price of gas and electricity tends to benefit the better-off more, because they usually use more energy.

That is why the targeted policy announced by Sunak as chancellor in May could be described as “more progressive” than Starmer’s plan. It focuses most of the help on pensioners and people on benefits – apart from the £400 flat-rate help that comes automatically off everyone’s bills.

Sunak now says he would increase that help through the benefit system to cover the further increase in prices expected since his announcement in May. The awkward question for Labour is why, if they propose to spend more than that, it should go overwhelmingly to the better-off. But fortunately for Starmer, no one is asking that question, because the simplicity of fixing prices for every household is such a bold stroke. And it has the added advantage of directly suppressing inflation.

But it would be fantastically expensive, the equivalent of another furlough scheme. Labour has tried to play this down by costing the scheme for just six months, although gas prices are predicted to remain higher than twice the historical average until 2025. The party has also been unconvincing about how it would be funded: Labour’s main source of extra revenue would be a higher windfall tax on the oil and gas companies, but that wouldn’t be enough to pay for the plan for six months, let alone for longer.

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On the other hand, it is enough to get shadow ministers through interviews, and to fill the gap left by the windfall tax itself, which Boris Johnson and Sunak stole from the opposition in May. Labour has desperately needed a dividing line separating it from the government since then, and by last week Starmer was coming under intense pressure, while he was on holiday in Majorca, to say something distinctive about the energy crisis. Some Labour MPs were horrified when Ed Davey, the Liberal Democrat leader, advocated a price freeze – “bold and urgent action” – a week ago. But now the Labour leader has a plan, and the history of how he got here will be forgotten.

And this is a dividing line that will last, I think, despite Starmer suggesting yesterday that the next prime minister could steal his policy. The windfall tax was one thing; this is different. It is the very definition of the “Gordon Brown economics” that Truss attacks, taking money in taxes and then handing it back to people.

The only aspect on which the government might yield might be on help for people on low incomes who are not pensioners or on benefits. Sunak as chancellor used the council tax system to target extra help on people living in homes in the lower bands A to D, so we might see more of that kind of scheme to help what Theresa May called the “just about managing”.

But now we have the battle lines drawn for the autumn, the arrival of a new prime minister and the party conferences: Labour’s bold but unaffordable scheme versus the new prime minister’s targeted help that will never be enough.