Halting price rises in both October and January would save the typical family £1,000 and keep inflation under control during the cost of living crisis, according to Labour.
Sir Keir said his “fully-funded” £29bn plan to keep the cap at current levels throughout the winter would partly be covered by expanding the windfall tax imposed on oil and gas giants.
“Britain’s cost of living crisis is getting worse, leaving people scared about how they’ll get through the winter,” he said. “This is a national emergency. It needs strong leadership and urgent action.”
Closing the “absurd” loopholes in the windfall tax introduced in the spring by the chancellor at the time, Rishi Sunak, and backdating the levy to January, would raise £8bn, Labour said.
The rest of the price freeze would be paid for using the £14bn earmarked by the government for extra support to cover energy bill rises, and £7bn saved in debt interest payments through reduced inflation.
The energy price cap, the maximum amount companies can charge, is currently set at £1,971 a year – but it is expected to climb to almost £3,600 a year in October and over £4,200 in January.
The End Fuel Poverty Coalition – a group of around 60 charities and civil society groups – welcomed Labour’s plan, but insisted that extra financial support would still be needed for those already struggling with increased bills.
Simon Francis, coordinator of the coalition, told The Independent that he hoped Sir Keir’s announcement was “the start of politicians finally waking up to the fuel poverty crisis this winter”. But he added: “We will also need to see additional support for some of the most vulnerable households.”
Liberal Democrat leader Sir Ed Davey – who proposed an energy price cap freeze a week ago – mocked the timing of Labour’s policy. “Glad you liked my proposal to cancel the energy price rise. I also have some thoughts on electoral reform that you’re welcome to adopt,” he tweeted.
Research by the Institute for Public Policy Research (IPPR) think tank, to be published on Monday, bolstered the opposition parties’ case for an energy price cap freeze. It showed that freezing fuel bills would help keep inflation at just over 9 per cent, as well as easing the burden on families.
It comes as the Tory leadership contenders, Mr Sunak and Liz Truss, are facing a call to more than double the level of support to low-income families in order to avert a “catastrophe” over the winter.
A coalition of 70 major charities signed an open letter to Ms Truss and Mr Sunak, warning that families on benefits face a £1,600 shortfall over the coming months in spite of the government’s existing £1,200 support package.
Meanwhile, chancellor Nadhim Zahawi is thought to have asked Treasury officials to draw up plans to cut gas and electricity bills by an extra £400 in January through a new lending scheme for energy providers.
However, the new lending scheme would not be implemented fast enough for October’s rises. And there is no guarantee that either Mr Sunak or Ms Truss would take up this plan on becoming prime minister.
The End Fuel Poverty Coalition said the reported Treasury plan would not “touch the sides” of the huge rises people are facing in October and January.
“The government is tinkering around the edges with plans to offer increases in existing support,” Mr Francis told The Independent. “This is a long way from what is needed – a comprehensive plan to provide emergency funding for households this winter.”
National Energy Action’s chief executive, Adam Scorer, said on Sunday that the Treasury’s plan as reported “doesn’t seem proportionate to the cost of living crisis”.
Ms Truss, the strong favourite to be the next PM, is understood to have concerns about the £400 energy bill discount already announced by the Treasury earlier this year going to the wealthiest individuals and families.
She could stop the planned £400 payment, which is set to be made to all households in the UK this autumn, from going to “high earners”, according to The Sunday Telegraph.
Bill Bullen, chief executive of Utilita Energy, shared his frustration at the timing of the Tory leadership contest and the continuing uncertainty – saying it was “not a great time to have a lame-duck government” in No 10 and Whitehall.
“It would just be helpful to be working with the team that is actually going to implement whatever mechanism it is, because we’re running out of time here,” Mr Bullen told Times Radio during a discussion of possible measures ahead of October’s price rise.
The energy company chief called for “a proper cap on prices, especially for low-income households” over the long term – suggesting that a new “social tariff” could be introduced for the poorest on a permanent basis.