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Major in tax call over energy firms

Energy companies should be hit with a windfall tax to cover the cost of Government help for people struggling with "unjustified" hikes in their bills, Sir John Major has said.

The former prime minister said the Government will have to intervene over the coming months to stop the poorest having to chose between eating or heating their homes.

His decision to get involved in one of the main current political battles came as the leaders of the Big Six energy firms were called to give evidence to MPs about the latest round of price increases.

David Cameron said the Government was doing "everything in our power" to keep bills down as he acknowledged public concern about the cost of energy.

In a blog on LinkedIn, he said: "With winter closing in, I know just how worried people are about the cost of heating and powering their homes. We are doing everything in our power to keep bills down, for instance legislating so that the energy companies have to put people on the best deal."

Speaking at a lunch with journalists in Westminster, Sir John acknowledged there was "a lot being done" to help people in fuel poverty, including 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 an 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 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."

Explaining the timing of his comments, 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."

The cost of energy has shot up the political agenda following Ed Miliband's pledge to freeze bills for 20 months if he takes power in 2015.

Labour seized on Sir John's comment that "government should exist to protect people not institutions" as a criticism of the Prime Minister.

On Twitter, Mr Miliband said: "Sir John Major makes Labour's argument: David Cameron stands up for the energy companies not hard-pressed families."

Sir John, who initially mixed up Mr Miliband with his brother and former leadership rival David, denied that his stance played into Labour's hands because he was not endorsing the "very bad" idea of a freeze which showed the Labour leader's head had "gone walkabout".

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."

Downing Street said the Government had "no plans" for a windfall tax of the type proposed by Sir John.

Mr 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."

Industry body Energy UK said people worried about coping with their energy bills should get in touch with their supplier.

"No one should be afraid to put the heating on this winter," a spokesman said.

"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."

Three of the Big Six energy firms have announced price rises in recent weeks - 8.2% by SSE, 10.4% for electricity and 8.4% for gas by British Gas, and 9.3% and 11.1% respectively by npower.

Their bosses, together with representatives from smaller companies, have been called to give evidence to the Energy and Climate Change select committee in Parliament on October 29.

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