Keir Starmer attacks Liz Truss over stance on energy windfall tax

Sir Keir Starmer has criticised Liz Truss for refusing to impose a fresh windfall tax on the energy industry to help fund her estimated £150bn rescue package, as the Labour leader sought to create a new dividing line between Britain’s two main political parties.

Allies of the prime minister have said she will set out on Thursday “gargantuan” measures to protect households and businesses from spiralling energy prices, with the cost set to be paid by the government through more borrowing.

At Truss’s first prime minister’s questions on Wednesday, Starmer did not question the wisdom of the overall package but sought to create distance between the two parties over how it should be funded.

Senior Labour figures expect clashes between Starmer — who had a visceral dislike of former prime minister Boris Johnson — and Truss to be less personal and more focused on ideological differences, given her rightwing and pro-market views. They anticipate the row over an energy windfall tax being the first of many such debates.

“We are bracing ourselves to have an ideological argument, and we think the public will come down on our side,” said one official. “The public are going to get a clear choice.”

Starmer said it was unfair that the rescue package would ultimately be paid for through general taxation or spending cuts, rather than through more targeted taxes on big business.

He also pointed to Treasury estimates that the energy industry could receive as much as £170bn in windfall profits because of the sharp rise in international gas prices, saying: “Every pound of excess profits she chooses not to tax is another £1 of excess borrowing which working people will have to pay.”

In response, Truss reiterated that she was “against a windfall tax”, adding: “I believe it is the wrong thing to be putting companies off investing in the United Kingdom just when we need to be growing the economy.”

In reality, the difference between the two on a windfall tax is in part presentational.

Despite Truss’s comments, her spokesperson on Wednesday admitted she would not cancel a £5bn windfall tax on the oil industry introduced by former chancellor Rishi Sunak, which took effect in May.

Similarly, although Labour has proposed that a more extensive £8bn windfall tax be backdated to January, it would raise only a tiny fraction of the cost of Thursday’s roughly £150bn package.

There is a bigger divide over Truss’s plans to reverse a £17bn-a-year planned rise in corporation tax and a recent £13bn-a-year increase in National Insurance to fund the NHS.

Starmer has described the planned tax cuts as “magic money tree economics”, citing the already dire state of the public finances.

But both leaders believe it serves their political purpose to play up their ideological differences over the windfall tax as well as Truss’s tax cuts.

Truss on Wednesday suggested that Starmer was reverting to old-school Labour “tax and spend” socialism, saying the country could not “tax its way to growth”.

In turn, Starmer asked: “Is now the right time to protect Shell profits and give Amazon a tax break?”

The Labour leadership has mixed feelings about the departure of Johnson.

While he had become a deeply divisive figure after a series of scandals including partygate, which involved illegal parties in Downing Street during Covid-19 pandemic lockdowns, Labour remains scarred by the 2019 general election.

In that ballot, Johnson won many pro-Brexit “Red Wall” seats in the former industrial heartlands of northern England and the Midlands for the first time.

One Labour aide said Johnson was still “without a shadow of doubt” the most feared Tory politician at least in terms of trying to win back the Red Wall.

But Starmer has privately warned colleagues not to underestimate Truss, predicting that she will benefit from the poll boost enjoyed by most new premiers, especially if the energy package is well received.

His team also believes, however, that Truss will struggle to define herself as a break with the past, given that she served in the cabinets of Conservative predecessors David Cameron, Theresa May and Johnson.

One Labour strategist said Truss would “be handing out a load of money within days so she should get a boost, but at the moment most people don’t know much about her and she has a short window to define herself”.