Tory MPs vote down plans to slash energy bills amid looming cost of living ‘catastrophe’

Britain's Prime Minister Boris Johnson speaks at a press conference to update the nation on the Covid-19 booster vaccine program in the Downing Street briefing room in central London on December 15, 2021. - British Prime Minister Boris Johnson on Wednesday defended his record on tackling the coronavirus pandemic, after nearly 100 of his own MPs broke ranks and rebelled against new restrictions. (Photo by Tolga Akmen / POOL / AFP) (Photo by TOLGA AKMEN/POOL/AFP via Getty Images)
Tory MPs voted down measures to address the growing cost of living crisis. (Getty Images)

Tory MPs have voted down proposals by Labour to cut VAT on energy bills, despite experts warning of a looming cost of living "catastrophe".

Typical annual energy bills are set to increase by up to £700 when the energy price cap is lifted in April, with poorer households more likely to feel the squeeze.

The measures, which were rejected by 319 votes to 224, would have saved the average household £200, according to analysis by the Labour party. 

Ahead of the vote in parliament on Tuesday, shadow chancellor Rachel Reeves accused Rishi Sunak of being "in hiding" and a cost of living crisis for the prime minister was "when you can’t find a friend to pay for the luxury refurbishment of your flat" as she outlined the proposals. 

Read more: Will cutting VAT on energy bills help consumers?

“Our plan would save households £200 off their bills, with up to £600 in total for those who need it most," she said. 

“We will pay for this with a windfall tax on North Sea oil and gas profits. These companies have profited massively because of exploding prices. 

"So much so, that some in the industry have referred to soaring energy prices as a cash machine for producers and their shareholders.”

Watch: Labour plans windfall tax on North Sea oil and gas producers

However, chief Secretary to the Treasury, Simon Clarke, defended the government's decision citing other measures like raising minimum wage and aspects of the Autumn budget. 

“The cost of living is not about any single bill or expense and that is why at the Autumn Budget the Government put in place a host of measures to help families with the cost of living," he said. 

He added: "We have acted not just on energy bills, but in dozens of ways to support working families and our record in handling the economy during a pandemic indeed over the last decade of recovery speaks to our commitment to see right by the British people."

It comes as experts warn of a difficult year for millions of Brits as prices rocket. 

Torsten Bell, chief executive of low and middle incomes think tank the Resolution Foundation, said the combination of soaring inflation, rising energy bills, and tax rises is creating a "cost of living catastrophe". 

Read more: April could have 'catastrophic' impact on cost of living for swathe of UK population

“The scale of this catastrophe is so huge, and so difficult for low-income families to cope with, the government will have to step in," he said. 

He added: "The government has been understandably focused on Omicron but has woken up to this crisis, and is now discussing policy action to address it. 

"But there is no magic bullet. What’s worse, this comes on the back of a decade of stagnant living standards.”

Elsewhere, the director of the Institute for Fiscal Studies (IFS), Paul Johnson, has warned that 2022 "could well be worse than the financial crisis" in 2008/09 for millions of Brits. 

And it appears these concerns are not unfounded, with one in three Brits "worried" that their bills may become "more expensive than they can afford" in 2022, according to a new YouGov poll for The Times

Watch: Johnson dismisses calls to scrap VAT from household energy bills