Cameron hits back at opposition with energy bill promise

By Peter Griffiths

LONDON (Reuters) - Prime Minister David Cameron promised on Sunday to cut rising energy costs, seeking to regain the initiative from the Labour Party that has pledged to freeze bills if it wins the next election in 2015.

Cameron said his government would set out measures to cut bills by an average of 50 pounds ($81.90) a year in an economic update on Thursday which the Chancellor of the Exchequer George Osborne said he would use to carry on reducing Britain's budget deficit, even as the economy recovers.

The soaring cost of household energy has dominated political debate in Britain since Labour leader Ed Miliband said in September that his party would freeze bills for 20 months if it wins power.

Labour has shifted its attack on Cameron from the long flat-lining economy, which has returned to growth this year, to what it calls a cost of living crisis. Many families are squeezed by weak wage growth, rising bills and government cuts.

"Instead of a fake giveaway, we have found another way to support Britain's hard-pressed families," Cameron wrote in a joint article with Deputy Prime Minister Nick Clegg in the Sun on Sunday newspaper.

The coalition government says Miliband's cap on bills would not work because energy suppliers would raise their prices before and after the 20-month freeze, wiping out any savings.

Cameron said he would transfer the cost of helping the poorest families with energy prices from household bills to general taxation, paid for by a tax avoidance crackdown.

The cost of a scheme to subsidise the insulation of houses - also included in household energy bills - will be spread over a longer period to bring down its cost, he added.

Osborne said the government was pressing utilities to make sure the changes helped customers. "The discussion with the energy companies is of course to make sure these are passed on to hardworking families," he told BBC television.

LABOUR LEAD

Labour has used the issue of energy costs to argue that Cameron is out of touch with ordinary voters and that he has overseen an unfair recovery that has left the poorest behind.

Five of Britain's "Big Six" energy suppliers have increased their charges this winter by an average of 8 percent, more than three times the rate of inflation.

Centrica, SSE, RWE's npower, Iberdrola's Scottish Power, EDF Energy and E.ON - supply 98 percent of the country's homes.

A poll in October suggested Miliband's promise to freeze energy bills was the most popular idea to emerge from the political parties' autumn conferences.

A separate survey for the Observer newspaper on Sunday gave Labour a seven-point lead over Cameron's Conservatives.

Asked if the announcement was forced on the government by Miliband, Osborne said Labour's plans were unworkable and unrealistic. "Ed Miliband ... promises what he can't deliver. It's not credible, it's a con," he told the BBC.

Labour finance spokesman Ed Balls said shifting some of the costs from energy bills to general taxation was "taking with one hand to give with the other".

Osborne said he would use the half-yearly budget statement to stress that more work needs to be done to fix the country's public finances, even as the economy is returning to growth.

"The economic plan is working and a recovery is under way," he said. "In the Autumn Statement, I will say the job is not yet done because we have got to make sure we go on taking the difficult decisions to secure that recovery."

Osborne also said there was no house price bubble in Britain but the government and Bank of England were working together "to make sure we don't repeat the mistakes of the past, we monitor debt levels in the economy, we spot asset booms like housing booms before they emerge and take action".

(Additional reporting by William Schomberg; Editing by Mark Potter/Mark Heinrich)