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Major Urges U.K. Energy Windfall Tax If Cold Pushes Up Spending

Former Conservative Prime Minister John Major called for a one-time tax on energy company profits if the U.K. government has to spend more on cold-weather payments to pensioners and other benefit recipients this winter.

Major told reporters at a House of Commons lunch in London today it’s “not acceptable” for companies such as RWE AG (RWE)’s nPower unit and Centrica PLC (CNA)’s British Gas to set prices far above wholesale rates. Npower said yesterday it will raise gas prices by 11.1 percent, while British Gas is set to increase electricity costs by 10.4 percent. Three of the Big Six energy suppliers that dominate the U.K. market have announced higher prices in the past two weeks.

“At the moment I do not see how it can be in any way acceptable that with energy prices rising broadly 4 percent in terms of costs that the price for the consumer should rise by 9 to 10 percent,” Major said. He said the price increases would mean poorer people having to choose between heating and eating.

“If we get this cold spell, the government will have to intervene and if they do intervene and it is costly, I for one would regard it as perfectly acceptable for them 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 back to work,” he said.

The government makes cold-weather payments to the elderly and people receiving some other types of welfare payments of 25 pounds for each seven-day period when the local temperature is forecast to be below zero degrees Celsius. Pensioners also receive an annual winter-fuel payment of as much as 300 pounds.

‘No Plans’

Prime Minister David Cameron’s spokesman Jean-Christophe Gray dismissed Major’s call, telling reporters it’s “an interesting contribution” and the government has “no plans” to levy a tax on energy companies.

The energy-price increases far outstrip the rate of consumer-price inflation, at 2.7 percent in September, while average wages increased by only an annual 0.7 percent in the three months through August.

The opposition Labour Party, which is attempting to gain support by campaigning on the cost of living, said the remarks by Major, who was premier from 1990 to 1997, were an endorsement of their plan to freeze energy prices if it wins power in the 2015 general election.

“Sir John Major makes Labour’s argument: David Cameron stands up for the energy companies not hard-pressed families,” Labour leader Ed Miliband said on Twitter.

Even so, Major attacked the Labour policy, saying Miliband’s “heart is in the right place but his head has gone walkabout.”

The House of Commons Energy Committee said today it was summoning the heads of the Big Six energy suppliers to Parliament next week to explain price increases.

To contact the reporter on this story: Kitty Donaldson in London at kdonaldson1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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