Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Sir Keir Starmer’s cost of living tsar has suggested that the British government should impose a temporary profit cap on energy companies and petrol retailers to curb “profiteering” during the current increase in energy prices triggered by the Iran war. 

Lord Richard Walker — the executive chair of Iceland supermarkets, who was appointed to the government role last month — proposed a profit cap which would limit the earnings those companies could make during exceptional market conditions. 

Walker said he was not in favour of the Green Party’s suggestion of a comprehensive, open-ended energy price cap, warning that it could lead to “disastrous consequences such as rationing”. 

But he wrote in the Sunday Times newspaper: “I have asked the government to consider a temporary profit cap, if required, to stop producers and retailers exploiting the crisis to make windfall profits at the expense of consumers.”

He added: “As executive chairman of a retailer, I have no problem with profit. It’s what allows businesses to invest, employ people and pay tax. But I do have a big problem with profiteering, especially when families are under real pressure.”

There is already a windfall tax on North Sea oil and gas producers that was introduced in 2022. But Walker suggested that the cap could apply much more widely to both “producers and retailers” who might be making windfall profits at the expense of consumers. 

Officials said there were no current plans to introduce a temporary profit cap but they did not rule out the possibility of one being introduced in future. 

One government figure praised Walker for “thinking big thoughts” while another person close to the situation said there was an “active discussion” taking place in Whitehall about how the measure could work.  

The price cap that dictates the typical British household energy bill is expected to climb by £332 in July compared with the previous quarter, largely due to the rise in wholesale prices of gas and electricity triggered by the Iran war, according to fresh forecasts. 

Cornwall Insight, a consultancy, said on Friday that it expected the price cap on energy bills during July to September to be set at a level that would see typical households pay £1,973 a year, or 20 per cent more than the quarter from April to June.

Meanwhile the price of petrol and diesel has already jumped as a direct result of the US-Israeli invasion of Iran. 

Ministers are now under pressure from motorists and opposition parties to rethink a 5p rise in fuel duty set to be imposed in September. 

Steve Reed, housing secretary, said on Sunday: “The government will take what action is necessary . . . we are monitoring this, believe me, hour by hour, and as intervention is required the government is making appropriate interventions, we are focusing on keeping bills down.”

Starmer will this week hold an emergency meeting of the Whitehall emergency committee known as Cobra with cabinet ministers and Andrew Bailey, governor of the Bank of England, to discuss support for households facing rising bills. 

Walker was appointed in February and is charged with looking at various areas where the government could help tackle the cost of living crisis, from childcare to transport. 

In his first interview in the role, he recently told the FT that he was open-minded about specific interventions but was looking at ideas including tackling bank late payment fees to removing more levies from the cost of energy. 

The government said on Sunday that its priority was supporting families struggling with the cost of living. “We continue to take robust action to protect consumers,” it said, pointing to recent measures to cut energy bills by £117, freeze rail fares and prescription charges, and roll out free breakfast clubs.