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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 surge in energy prices triggered by the Iran war.
Lord Richard Walker, executive chair of Iceland supermarkets who was appointed to his 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 UK windfall tax on North Sea oil and gas producers that was introduced in 2022, but Walker suggested his temporary profit cap could apply much more widely to both “producers and retailers” who might be making windfall earnings at the expense of consumers.
Government officials said there were no current plans to introduce such a 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 of petrol and diesel in the UK has already jumped as a result of the US-Israeli war against 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.”
But Gordon Balmer, executive director of the Petrol Retailers Association, highlighted pressure on businesses that were buying fuel priced on a daily basis, notably smaller firms. “Far from profiteering, many companies are in negative territory at the moment,” he said.
He also highlighted how companies were facing higher business rates and said he would “welcome the opportunity to discuss with Lord Walker what is the plan for helping those small businesses because many of them are now going to struggle”.
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.
The consultancy Cornwall Insight estimates the UK energy price cap for July to September will push typical annual household bills to £1,972, up from £1,641 between April and June.
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 added, pointing to recent measures to cut energy bills, freeze rail fares and prescription charges and roll out free breakfast clubs.
Paul Nowak, general secretary of the Trades Union Congress, called on ministers to form an emergency task force involving employers and unions to “get ahead of this crisis” and shield workers and businesses from the worst of any shock.
Economists are raising their UK inflation forecasts while cutting growth expectations as a result of higher energy prices.
Consultancy KPMG said it expects UK economic growth to slow to 0.7 per cent in 2026, down from 1.3 per cent in 2025, while inflation is forecast to reach 3.1 per cent this year.
The recent increase in energy prices has also triggered a sharp reassessment in markets about the path for interest rates. UK borrowing costs rose to their highest level since 2008 on Friday, and mortgage rates are rising.
