Energy companies should be hit by a profit tax to fund help for people struggling to pay their bills if there is a cold snap this winter, Sir John Major has said.
The former prime minister said he believes the Government will have to “intervene” over the coming months to stop the poorest having to chose between eating or heating their homes.
Sir John said that Labour leader Ed Miliband’s “heart was in the right place” when he suggested a cap on energy prices, but insisted the plan was unlikely to work.
The Coalition will, however, have to interfere in the market to protect people from the “unacceptable” hike in prices being introduced by Britain’s biggest energy firms.
Sir John, speaking at a Parliamentary Press Gallery lunch, said: “When Ed Miliband made his suggestions just a few weeks ago I think his heart was in the right place but his head had gone walkabout.
“But he did touch on an issue that’s very important.
“The private sector is something the Conservative party support but when the private sector goes wrong or behaves badly I think it is entirely right to make changes and put it right.”
Sir John said there was “a lot being done” to help people in fuel poverty, including help through the winter fuel allowance and cold weather payments. “But at the moment I do not see how it can be in any way acceptable that with energy prices rising broadly 4% in terms of costs that the price to the consumer should rise by the 9-10% that we are hearing,” he said.
“I do not regard that as acceptable at all by the energy companies.”
He added: “And it is not acceptable to me, it ought not to be acceptable to anyone, that many people are going to have to chose between keeping warm and eating. That is not acceptable. So if we get this cold spell the government, I think, will have to intervene and if they do intervene, and it is costly, I for one would regard it as perfectly acceptable for them then, subsequently, to levy and excess profits tax on the energy companies and claw that money back to the Exchequer, where their primary job is to get the economy working and people back to work.”
Sir John told reporters that with interest rates at a record low, energy companies should be looking to borrow money to pay for investment rather than funding it “out of the revenue of families whose wages have not been going up at a time when other costs have been rising”.
I believe there will be difficulties this winter without action and, if there are those difficulties, the Chancellor will have my total support if he acted in the way I suggest and imposed an emergency impost upon the energy companies to claw back the money that we will have to give to people to help them see the winter in any form of warmth.”
Sir John said he backed comments made last week by the Archbishop of Canterbury over the spiralling costs consumers are facing.
Justin Welby said the last wave of rises was ‘’inexplicable’’ and insisted the Big Six companies had an obligation to behave morally rather than just maximising profit. Labour has pledged a 20-month price freeze if it takes power in 2015 but Prime Minister David Cameron has dismissed the idea as a ‘’con’’, and encouraged consumers to switch suppliers to keep bills down.
Sir John denied that his comments played into Labour’s hands.