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Major calls for energy profit tax
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, who initially mixed up Ed Miliband with his brother David, denied that his comments played into Labour's hands.
"I'm not sure about handing a victory to which ever Miliband it is, I think the latest incarnation is Ed, since I expressly said that his idea was a very bad idea, that is showed a good heart but showed his head had gone walkabout. So, I don't think so."
He added: "I think Ed's idea was wrong but his heart, in turning to a problem that is going to be very real this winter, was focused on the right subject."
Labour seized on Sir John's comments that "government should exist to protect people not institutions".
On Twitter, Ed Miliband said: " Sir John Major makes Labour's argument: David Cameron stands up for the energy companies not hard-pressed families."
Downing Street said the Government had "no plans" for a windfall tax of the type proposed by Sir John.
David Cameron's official spokesman told a regular Westminster media briefing: "The Prime Minister's view on this is that this is an interesting contribution. We have no plans for this."
The spokesman added: "What the Government is doing is legislating around forcing energy companies to put customers on their lowest tariffs and more competition in energy markets."
Asked about Sir John's concerns about people having to choose between eating and heating this winter, the spokesman said: "There are a number of initiatives that the Government has to support vulnerable people, such as the cold weather payments.
"We have a range of ways in which support is given and those are the right ones."
Shadow cabinet office minister Jon Ashworth said: "It's deeply embarrassing for David Cameron that a man famous for not wanting to criticise his successors would come out and say what everyone else is thinking: this Prime Minister is completely out of touch. David Cameron stands up only for a privileged few and has no answers to the cost of living crisis he's created.
"John Major has become the latest voice to recognise that people are sick and tired of being left out of pocket because of David Cameron's failure to stand up to the energy companies.
"That's why we desperately need a Labour government which will freeze energy bills to save money for 27 million households and 2.4 million businesses and reset the market to deliver fairer prices in the future."
Explaining the timing of his intervention Sir John told BBC Radio 4's PM programme: "The Government has done a very great deal but in the last few days we have suddenly become faced with a new situation and a very dramatic and, it seems to me, unjustified increase in the price of energy.
"Nobody, not the energy companies, nobody can do anything about an increase in the world price of energy. But the increases we are seeing are significantly larger than that and I for one don't think that is either fair or acceptable."
Sir John said he was not advocating a pre-emptive tax, but would want to see the energy giants forced to reimburse the Exchequer for costs of Government action to help people keep warm.
"I am saying that if their policy have left the Government in a position where to stop people being cold this winter they have to provide more money to keep them warm then it would be perfectly reasonable, given the scale of these extraordinary increases and the enormous profits the energy companies are making, to recoup that money subsequently back from the energy companies."
Industry body Energy UK said: "No one should be afraid to put the heating on this winter. If customers are worried they should get in touch with their energy supplier and they should be able to help.
"The energy industry is doing an increasing amount to help vulnerable customers and we will be looking at what more can be done to help people worried about their bills.
"There are already a number of schemes to help and to make homes more energy efficient so people can control their energy use and keep warm this winter.
"Energy companies are also putting money back into their businesses to invest and build in the secure, sustainable and affordable energy future the UK needs.
"We want to talk to interested groups about the way forward and believe this is an important contribution to the debate."