Business Rates Avoidance Schemes

Lord Sikka Excerpts

Wednesday 16th September 2026 Lords Chamber

Asked by

[Lord Sikka]

To ask His Majesty’s Government what steps they plan to take to disable business rates avoidance schemes and the industry promoting them.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

Most businesses pay the rates that are due, but a minority abuse the system to reduce their bills or avoid paying altogether. This imposes an unfair burden on the majority and prevents funding reaching local services. This Government will not tolerate tax avoidance and are committed to taking the necessary action to address avoidance and evasion. Decisions on tax are set at fiscal events and I will not speculate on the upcoming Budget.

[Lord Sikka (Lab)]

My Lords, I thank the Minister for his reply. After claiming empty property relief, some businesses place empty boxes in premises to give the appearance of occupation, subsequently removing them to trigger an additional period of relief. One scheme operated by Principled Offsite Logistics Ltd has deprived councils of £500 million of business rates. Can the Minister ensure that business rates avoidance receives the same priority as tax avoidance and will the Government publish an annual estimate of the revenues lost, require registration of all business rates avoidance schemes and prosecute the enablers?

[Lord Wilson of Sedgefield (Lab)]

My noble friend raises an important point on tax avoidance with business rates. There has been coverage of some of the most egregious instances of business rate avoidance over recent years, including the use of snail farms and prayer rooms. A recent court case, which my noble friend referred to, has made it significantly more difficult for the most common avoidance schemes to be effective. This was a case brought by the City of London; the Court of Appeal ruled in favour of the City of London, and as a result the attempt to secure repeated periods of empty property relief using box shifting failed. The ruling has closed down this particular avoidance scheme, and as a result local authorities can withdraw empty property relief if they are satisfied that a scheme in their area falls within the ruling.

Preparing for an Ageing Society (Economic Affairs Committee Report)

Lord Sikka Excerpts

Friday 4th September 2026 Lords Chamber

[Lord Sikka (Lab)]

My Lords, ageing problems begin during childhood and are incubated by poor government policies. A June 2026 paper in Nature Human Behaviour noted that consequences of poverty, inequality and discrimination accelerate biological ageing from a very young age. Adults enduring childhood economic deprivation age at a significantly accelerated biological pace, even if they achieve financial security in later life. Many need support.

Austerity, real wage and benefit cuts, and degradation of the NHS deprive people of nutritious food, good housing, healthcare and possibilities of working until a later age. A regressive tax system prevents the poor saving for old age. The poorest 20% pay a higher proportion of income in direct and indirect taxes than the richest 20%. The income tax personal allowance has been frozen at £12,570 since 2021. If it had increased in line with inflation, it would now be £16,070. As a result, someone earning just £17,000 this year will be paying £1,000 more in income tax and national insurance.

Some 39% of adults in the UK have savings of less than £1,000. Millions simply cannot save for old age. Premature biological ageing prevents people working until a later age. Some 7.27 million hospital appointments are awaited, fuelling a rise in chronic illness and disabilities. The average healthy life expectancy has declined to 60.7 years for males and 60.9 years for females. In parts of Blackpool, it is 50.9 years for males and 51.2 years for females. In parts of Scotland, it is 44.8 years for males and 44.2 years for females. It is hard to know how we are going to get people aged around 50 to work.

Calls for educating younger people about the financial cost of retirement will bear little fruit. In a society where 1% have more wealth than 70% of the population combined, pushing pensioners into poverty is not the answer: it will simply lead to a form of economic euthanasia. The ageing problems are nurtured by inequitable distribution of wealth, poor housing and healthcare, and regressive taxation. Government must rise to the challenge.

Steel Industry (Nationalisation) Bill

Lord Sikka Excerpts

2nd reading
Tuesday 16th June 2026 Lords Chamber

[Lord Sikka (Lab)]

My Lords, this enabling Bill paves the way for a possible nationalisation of steel companies, with a particular emphasis on British Steel, currently owned by the China-based Jingye Group. This nationalisation may or may not happen—we have to wait and see. The Bill allows the Government to transfer the shares or property of a steel company into public ownership, where doing so is in the public interest. The concept of public interest is inevitably highly contested, and competing meanings can be advanced. It would be helpful to have the Minister’s explanation of the detailed conditions that would actually satisfy the public interest test; that might enable us to discuss public ownership of other industries as well.

The Minister’s explanation would help to dissolve uncertainty for workers, suppliers and local communities. Prolonged delay of nationalisation would increase the cost to the public purse as, since April 2025, the Government have already been incurring significant costs to keep the Scunthorpe plant going. I support the public ownership of steel, as it is a crucial input for so many industries. The Scunthorpe plant is the last UK plant producing virgin steel, which is essential for the construction of buildings, railways and critical hardware such as submarine hulls and aircraft landing gear. The loss of the plant would leave the UK as the only G7 country without the capacity to produce virgin steel. A large number of direct and indirect jobs depend on the plant. Nationalisation and expansion of the steel industry would help to expand our industrial base.

The Bill raises lots of questions about the Government’s strategy. It would rescue England-based British Steel but allow the Port Talbot blast furnaces in Wales to be extinguished. People in Scotland have still not forgotten the Government’s failure to rescue the Grangemouth refinery. Can the Minister answer the charge of being England-centric? Can he assure the House that once the Scunthorpe plant is nationalised, it would not be re-privatised by a Labour Government?

The Bill also throws up other inconsistencies in the Government’s policies. Nationalisation of steel and rail passenger services is apparently in the public interest, but the same is rejected for water, even though water companies exploit people, dump raw sewage in rivers and are destroying human lives, marine life and biodiversity. Some 120,000 people a year are dying in fuel poverty, but there is no attempt to nationalise energy. Is it that the Government are prioritising corporate interests over the lives of the people?

Part 2 of the Bill establishes a framework for possible compensation for nationalisation. I assume that this would eventually require another Bill. Can the Minister clarify the position? As British Steel is financially insolvent—it is finding it very difficult to survive and its assets probably have no alternative use value—the chances are that any compensation offered for it would need to be fairly low. Any framework for compensation must recoup the £500 million or so spent by the Government to keep the Scunthorpe plant going. The real value of all subsidies and grants must be recovered.

The Jingye site in Scunthorpe is the second-largest single-site source of carbon emissions in the UK. It accounts for approximately 2.2% of the UK’s total carbon footprint. Surely the Government will insist that Jingye makes good the environmental damage before it exits the steel industry. If not, it would be helpful to know why the Government would not insist on that.

As expected, the Opposition Benches have focused on the possible cost of nationalisation and its impact on the national debt. That is really a one-sided argument because through nationalisation, Governments also acquire the assets of the enterprise in question, enhance economic resilience and improve supply-chain security. The tendency of the ONS is to show the net liabilities of publicly owned entities and ignore the assets. It does that for Network Rail, where its liabilities are shown in the national debt but its assets are completely ignored. That practice needs to change. If changed, the ONS calculation must net off a nationalised British Steel’s liability against its assets, which would result in a very small change to any national debt calculation. Can the Minister clarify the position and indicate whether how we measure the national debt would be changed?

The high cost of energy is a major obstacle, as many noble Lords have already indicated. It puts steel- making and other industries at a competitive disadvantage. The high cost is an issue all across households as well. We know that, in April, the Government extended what they called the British industrial competitiveness scheme, which reduces energy bills by about 25% for 10,000 companies deemed to be heavy users of energy. That scheme kicks off in April 2027, although discounts would be backdated to 2026. The scheme is funded by the public purse and is therefore likely to be temporary. In any case, it does not help small businesses, farmers and others who are totally excluded from it.

A bright future for steel-making and British industry requires a permanent reform of energy costs. That would require decoupling the price of gas-produced electricity from the rest, moving all levies to general taxation, and cuts in the profit margins of energy companies. This in turn would require scrutiny of the way that Ofgem calculates the weighted average cost of capital and all the assumptions that are used to generate those numbers. Noble Lords earlier mentioned many countries which have a competitive advantage in energy production, such as France, Norway, Sweden, Denmark, Germany, India and China. What they did not mention was that in these countries, a significant part of energy production is state-owned so, freed from the need to generate profits, they are able to simply break even, taking one year with another. That therefore offers their industries a competitive advantage and lower rates of inflation.

Public ownership of energy must not be a taboo for the UK. It could give the Government more economic policy options and help to address the competitiveness of our industries. I look forward to hearing the Minister’s reply.

King’s Speech

Lord Sikka Excerpts

Thursday 14th May 2026 Lords Chamber

[Lord Sikka (Lab)]

My Lords, it will take a long time to undo the damage done by 14 years of Conservative rule. However, that task has been made difficult, as the Government’s ambition on so many fronts is not matched by actions. I welcome the attempts to build a closer relationship with the European Union, though that will not fully undo the damage inflicted by Brexit.

The energy resilience proposed by the energy independence Bill and the increase and extension of the windfall tax on electricity generators from 45% to 55% promised by the electricity generator levy Bill are most welcome. Can the Minister explain why there is no comprehensive plan to curb profiteering by energy companies? Since 2020, their UK operations have made profits of over £125 billion. More than 120,000 people in this country die in fuel poverty every year. Surely that deserves some kind of government response.

I have misgivings about the highways financing Bill, which will promote the dreaded private finance initiative, albeit under another name. Previous PFI schemes resulted in a £6 repayment for every £1 of private investment in infrastructure. The Government can fund projects at lower costs through borrowing, or issue public bonds, but such alternatives are ignored. The 129 pages of background notes miss out the word “manufacturing” altogether, even though every £1 of manufacturing activity supports a further £1.80 through multiplier effects. Can the Minister explain the Government’s plans for self-sufficiency in semiconductors, rare earth minerals, bricks, cement, auto, medicines and other essential items, to increase economic resilience?

The regulatory consolidation offered by the enhancing financial services Bill is welcome, although I am concerned that the reforms are framed around words and phrases such as “competitiveness” and “regulatory simplification”, which are buzzwords for deregulation. So far, they have facilitated the abolition of the post-2008 crash constraints and weakened consumer protection. The Government’s briefing notes make no mention of the social costs of deregulation. Can the Minister explain why there is no attempt to regulate private equity, which is devouring hospitals, care homes, veterinary services, supermarkets, and water, energy, retail and other businesses?

The so-called industry-friendly reforms of the Financial Ombudsman will weaken consumer protection, and there is complete silence on how UK institutions cover up fraud and financial abuse. We are still waiting for an investigation into the 1991 closure of the fraud-ridden Bank of Credit and Commerce International. I have asked questions in this House about the failure to tackle HSBC after it was fined $1.9 billion in the US in 2012 for facilitating money laundering. The then Chancellor, George Osborne, and the regulator secretly urged the US authorities to go easy on the bank. The response to my questions has been ministerial silence. On numerous occasions, I have referred to the HBOS frauds, which date back to between 2002 and 2007. Regulatory inertia and ministerial indifference have denied compensation to victims even after the courts established criminality. What good is an ombudsman system when Ministers and regulators sweep financial crimes under the carpet?

There are mixed messages from the Government about nationalisation. I welcome nationalisation of British Steel, but why are other steel producers not to be nationalised? Tata Steel also receives a subsidy. The Government, in return, have not taken an equity stake or a seat on the board. Why is this free money being given to companies for distribution to their shareholders?

I welcome the railways and passenger benefits Bill to establish Great British Railways and unite track and train management under a single body. However, why is no attempt made to bring lucrative freight and rolling stock companies into public ownership? These rolling stock companies have a profit margin of 41.6%. There is absolutely no justification for that. People are being told that the nationalisation of rail passenger services and British steel is in the public interest, but so is the nationalisation of water, energy, mail, social care and other essential services. Why are those things off the political agenda altogether?

Sustained economic growth, which is the Government’s aim, cannot be achieved unless people have good purchasing power, but 25.3 million people live in households below the minimum income standard. A major cause of this is the erosion of the workers’ share of gross value added, or GVA. In 1975, workers’ share of GVA was 71.9%. By 2025, despite economic growth in the intervening years, it had declined to 59.7%. There is a huge transfer of wealth from labour to capital, and it has coincided with lower rates of corporation tax. The headline corporation tax rate in 1974 was 52%, compared with 25% now.

The massive increase in capital’s share of the economy has not resulted in higher investment in productive assets. In 2025, the UK invested 18.9% of GDP in productive assets, the lowest figure among G7 nations. For the last 30 years, the UK has been at or near the bottom of the OECD league of investment. Inevitably, productivity and economic growth is low. Can the Minister explain how the Government will boost workers’ share of GVA and why there is no reform of corporate governance and short-termism in the City of London?

People’s purchasing power could be boosted by progressive taxation, but that is not on the agenda. The poorest 20% pay a higher proportion of income in direct and indirect taxes compared with the richest 20%. At the same time, capital gains and dividends are taxed at lower marginal rates than wages. How do you expect people to buy things? Problems are compounded by the freeze on income tax personal allowance. In April 2021, the Conservative Government froze the annual personal allowance at £12,570. The Labour Government continued with it. If the personal allowance had increased in line with inflation, it would today be £16,048. Due to the freeze, someone earning £20,000 will pay an additional £696 in income tax in this tax year alone. Adherence to regressive Conservative policies by this Government cannot deliver resilient households.

Overall, the Government have some good policies, but in the absence of transformative policies it will be difficult to declare sustained economic growth and resilient households. I urge the Government to change course.

Stock Market: First-time Investors

Lord Sikka Excerpts

Monday 3rd February 2025 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the noble Lord, Lord Lee of Trafford, for this debate and for his excellent opening speech. This debate comes on a day when stock markets are tumbling and hedge funds have bet billions on a market crash triggered by trade wars unleashed by US President Trump. These events further highlight the casino nature of stock markets, which can easily burn first-time investors. Woe betide any Government which encourage people to gamble on the stock market, especially if people incur losses.

Due to inequitable distribution of income and wealth, most people simply do not have the cash to gamble on the stock market. One recent survey suggested that 34% of adults either had no savings or had less than £1,000. Another reported that 66% of adults had average savings of less than £10,000, so buying and selling shares is not really a priority for most people, and they will inevitably look for safer investments.

A key requirement of risk management is to hold a diversified portfolio. That means holding securities that are negatively correlated—a correlation coefficient of minus one would be ideal, but nevertheless they have to be negatively correlated. However, that is not easy to achieve for first-time investors if they are directly investing. Institutions have lunch-table meetings with companies to extract information, but individual investors have no power to extract any information, and they cannot even analyse the publicly available information. The annual report of HSBC is over 400 pages long. I do not how many investors are going to pour over that to make any sense of it, even when this information is publicly available.

Before any Government encourage shareholding, they need to look at the impact of the shareholder model of corporate governance. Shareholders focus on the short term and have no loyalty to any business or community. Some time ago, the Telegraph reported that the average shareholding duration in the US was just 22 seconds. Can the UK really be that far behind? How would that stabilise investment and companies? Shareholders really want to resolve uncertainty as quickly as possible, and the way they do it is by demanding returns very quickly. Andy Haldane, one-time Bank of England economist, noted that in 1970 major UK companies paid out about £10 of each £100 of profits in dividends; by 2015, that amount had increased to between £60 and £70, and this was accompanied by a squeeze on labour and investment. Basically, the country’s corn seed was being destroyed.

Most corporate investment these days is funded by debt or retained earnings. Annual share buybacks exceed the IPOs. The net result is that the UK languishes near the bottom of the OECD league for investment in productive assets. Much of the daily churning of share transfer money is really transfer from A to B; hardly any of it goes directly into the productive assets of the company.

Therefore, I do not think that the Government should encourage first-time investors to gamble in the stock market without improving people’s disposable income and rethinking corporate governance and powers and the rights of all stakeholders, not just shareholders.

National Insurance: Charity Sector

Lord Sikka Excerpts

Monday 13th January 2025 Lords Chamber

[Baroness Twycross (Lab)]

Without wanting to repeat what my noble friend Lord Livermore would have said had he been here, we inherited a £22 billion black hole. I appreciate the sector’s concern, but, regrettably, as part of the Autumn Budget, the Government had to take a number of difficult decisions on tax and welfare spending. I know the Chancellor highlighted this decision as one of the hardest she had to make in respect of the Autumn Budget.

[Lord Sikka (Lab)]

My Lords, does the Minister agree that the impact of national insurance contributions on the charity sector can be alleviated by levying national insurance on capital gains and dividends?

[Baroness Twycross (Lab)]

That is a matter for the Chancellor, and I will pass on my noble friend’s suggestion.

Ministerial Appointments: Vetting and Managing Conflicts of Interest

Lord Sikka Excerpts

Tuesday 24th January 2023 Lords Chamber

[Baroness Neville-Rolfe (Con)]

The noble Lord is right. The other point worth making is that, as a Minister, it is your personal responsibility to make it known to your Permanent Secretary and, if appropriate, to the independent adviser, what conflicts of interest or perceived conflicts of interest you might have. This is a process that is gone through scrupulously, in my experience, when Ministers are appointed.

[Lord Sikka (Lab)]

My Lords, transparency is the biggest antidote to sleaze, which revolves around money. The best way of dealing with this is to ensure that all Ministers publish their tax returns. That policy can be made without waiting for any report from the independent ethics adviser. What objections can the Minister have to that suggestion?

[Baroness Neville-Rolfe (Con)]

There is an issue of balance between privacy and the need to know—the transparency. I have often engaged with the noble Lord on these tax issues and the Prime Minister himself has said that he will publish his tax return, but moving to a different system raises quite a lot of issues of balance. I come back to my point about personal responsibility and explaining where there are these issues or might be conflicts of interest when you are a Minister, or if circumstances change.

Government Contracts: Bain & Company

Lord Sikka Excerpts

Wednesday 23rd November 2022 Lords Chamber

[Baroness Neville-Rolfe (Con)]

There is corporate law which involves the suspension of directors, but I am not able to speak about it today; it is dealt with by another department. However, our new Procurement Bill improves the arrangements for debarment where exclusion is needed, perhaps because there has been insolvency, dishonesty, impropriety or a serious breach of ethical and professional standards. We will discuss that in this House on Report next week. I think we are moving forward in this area although we have to be fair and balanced, as the UK Government always try to be.

[Lord Sikka (Lab)]

My Lords, as the Minister knows, there is no central enforcer of corporate law in the UK and the whole scene is very disjointed. While the Minister is in the mood to tackle corruption, can I invite her to tell the House whether any of the big four accounting firms, whose tax avoidance schemes have been declared unlawful by the courts, have at any time during the last 12 years been investigated, prosecuted or fined, or have the Government even bothered to recover a penny of the legal costs?

[Baroness Neville-Rolfe (Con)]

I am grateful to the noble Lord for his comments, but it goes rather beyond today’s Question. However, I can say that the Cabinet Office conducted an in-depth review into KPMG following the finding against the firm of dishonesty in its role in the sale of the Silentnight group of companies. In fact, the review concluded that KPMG should not be excluded because it had carried out self-cleaning measures —that is where a company moves to demonstrate reliability and improve its compliance systems. It is very important that companies can do the right thing, particularly where mistakes have been made.

Economy: The Growth Plan 2022

Lord Sikka Excerpts

Monday 10th October 2022 Lords Chamber

[Lord Sikka (Lab)]

My Lords, the growth plan is based on the “horse and sparrow” economic theory. Its basic idea is that, if you feed the already well-fed horses additional oats, something will pass to the roadside to feed the sparrows, which will then magically lay some golden eggs and solve all our problems. Such economics were thoroughly debunked by the writings of people such as JK Galbraith, and there is absolutely no empirical evidence to support the basis of the Government’s economic plan. Handing tax cuts to the richest might enable them to speculate on the stock market, buy a few yachts, Lamborghinis, artworks, foreign holidays and second homes, but it has never enabled any country to build a sustainable economy.

The promised cut in the basic rate of income tax is illusory; the tiny gain will be wiped out by the stealth taxes, as the Government have already frozen personal allowances and income tax thresholds. In any case, the cut in basic rate of income tax will do absolutely nothing for 21 million adults whose annual income is less than £12,570. They will benefit zero; they are at the bottom of the pile, and they cannot contribute to a sustained economic growth. The Government by default appear to be relying on 30% of the population to fuel the economic growth; that has not worked anywhere on this planet, not even in South America, so I do not know how the Government are going to do this.

Since 2010, the UK has had low interest rates, inflation, corporation tax rates and a whole variety of tax reliefs to persuade companies to increase their investment. Throughout the 2010s, the UK put 16.9% of its GDP into productive assets and was ranked third from bottom in the EU productive investment league; only Greece and Portugal were below it. Could the Minister explain why the low corporation tax rates did not secure greater investment before, and how on earth they are going to do it the next time? Previous corporation tax cuts actually fuelled dividends, most of which were paid untaxed to foreign investors. Major UK companies are currently paying up to 80% of their earnings in dividends and share buy-backs. The Government’s growth plan makes no mention of any reform of short-termism or corporate governance, or any other pressures on corporations.

Good purchasing power in the hands of the masses is a necessary condition for corporate investment but is utterly neglected by the Government. In 1976, workers’ share of GDP in the form of wages and salaries was 65.1%; it is now less than 50%, the biggest decline in any western economy. If people have not got the money, they cannot buy—why would any company want to invest in productive assets? The Government have done absolutely nothing about that. Regressive taxation has been continuously championed by the Government and has further depleted the purchasing power of the low and middle-income households. The poorest 10% of households pay 47.6% of their gross income in direct and indirect taxes, compared to the richest 10%, who pay only 33.5%. The mini-Budget could have reduced VAT, but it did not actually do that—it did not really want to improve the purchasing power of the people at the bottom.

To sum up, the mini-Budget hoovers wealth upwards. It does not increase the people’s purchasing power, pays no attention to corporate governance or to short-termism or reasons for low investment, and it does not really provide any basis whatever for building a sound economy.

Elections Bill

Lord Sikka Excerpts

Report stage
Monday 25th April 2022 Lords Chamber

[Lord Grocott (Lab)]

My Lords, I strongly support my noble friend’s amendment, although I do not think it goes to the source of the problem. The source of the problem is the massive increase in the electorate contained within this Bill. We know from the impact assessment and I know from written replies I have had from the Minister that it increases the electoral roll of people living abroad—many of whom have lived abroad for decades—from around 1 million to 3.3 million, an increase of 2.3 million names. I remind the House that these will overwhelmingly be people who have lived abroad for more than 15 years—for many, 50 or 60 years —and who have no reasonable expectation of ever returning to this country. The Bill makes it easier for this registration to persist as, once on the register, names now remain for three years as opposed to one year previously, and you can get on the electoral roll by the process of attestation—in other words, providing you can get someone to attest that you lived at 22 Station Road 60 years ago, even though 22 Station Road has been demolished and you have not been back since, and that you are a bona fide former resident of the United Kingdom.

To me, that is wrong in principle, but I shall also apply it at a constituency level—the noble Lord, Lord Wallace, raised this and I can give him some of the answer. Under the present system, with the 15-year rule on residence that is allowed, in London and Westminster, 2.43% of voters at the last election were overseas voters. Let us assume that that increases by three, once these 2.3 million are added to the register. You could then have constituencies in the United Kingdom with 6,000 or 7,000 voters in an electorate of 73,000 who have no obvious connection whatsoever with the constituency in which they are voting. That, it seems to me, is wrong.

Whatever your view is, the absolute basis of our electoral system—which I cherish; I have to be controversial here by saying I am a powerful supporter of first past the post and single-member constituencies—is that representation, for a general election, is based on where you live. That is a very good basis for registration and voting, it seems to me. But, no, we are going to add 2.3 million people to the register who never lived in the country—not in recent memory.

In order to do this, the Government are spending some £15 million. I wish that they would show the same anxiety and commitment on making sure that people resident within the United Kingdom and not on the register at present were added instead of spending £15 million on getting people to vote in individual constituencies—possible decisively, affecting the result—who simply do not live in the area.

I am very sorry that this Bill has extended the period of residence from 15 years to life. I hope that the Minister can improve on his answer when I raised this before; he asked what on earth is the basis for objecting to supporting a 15-year rule, which says that—I quote him loosely—if you have been abroad for 15 years, you can vote in an election, but if you have been abroad for 15 years and a day, you cannot vote in an election. That really is a thin argument; he really can do better than that. That applies to any boundary—why do we say people can vote at 18 but not at 17 and 364 days? We can all find numerous examples of how people draw boundaries.

The problem of overseas voting—and here I find myself agreeing with the Green Party, which I do not on every occasion—is that with the possibility of this initial problem, which is that you can vote however long you have been away from the country, you can also now provide funds for parties. It means, as has already been said, that, in theory, a party could be almost entirely financed by people living abroad with no intention of returning to the United Kingdom or of living with the consequences of their vote. That is the other crucial element in our democracy: you live to see the consequences of your vote. People who voted Conservative—I hope a lot of them vote Labour at the next election—bear some responsibility for what is happening in the country at the moment. It is not the same responsibility as the Minister, of course, but they have some responsibility. Of course, if you live abroad, vote from abroad, remain abroad and intend to remain abroad, then you do not live with the consequences of your vote.

I very much regret that, somehow or other, this massive extension of the franchise is in this Bill, without any compensating extension of the franchise for people in this country who are not on the electoral roll. I have seen no sensible, adequate defence of it so far. I am sure that the Minister will do his best, which he is bound to do, but we have made a step in our democracy that violates the principle of representation by place of residence and adds the problem of enabling parties to be massively financed by people living and working permanently abroad.

[Lord Sikka (Lab)]

My Lords, it is a great pleasure to follow the noble Lords who have already spoken. I will speak briefly about Amendment 67. This amendment would require the Secretary of State to establish an independent committee to report on the creation of what I call a foundation for democracy, whose sole aim is to prevent the rich and corporations from directly funding political parties and hijacking the political system. Private money in our political system is a cancer, and the issue has not really been adequately addressed by this Bill.

In 1863, US President Abraham Lincoln visualised democracy as a

“government of the people, by the people, for the people”.

Some 160 years later, that remains elusive—we are light years away from it. Yes, people vote, but political power is increasingly concentrated in the hands of those who can fund political parties and get favour in return. Their preferences are prioritised.

--- Later in debate ---

[Lord Cormack (Con)]

Is the noble Lord not aware that Report is for short, sharp speeches, not this endless diatribe he is currently inflicting upon us?

[Lord Sikka (Lab)]

I am very grateful to the noble Lord for his observation. I am sure that members of the public would be quite interested to note that when an alternative proposal is put forward, it is called a “diatribe”. That kind of confinement of alternative, competing discourses to negative spaces does not do any good. But the message I want to get across is that there is a corrosive element at the heart of our democracy that can be dealt with only by ending the receipt of any private money by any political party.

[Lord Rooker (Lab)]

My Lords, the purpose of Report is to report back on things that were inadequately dealt with in Committee. Amendment 69, which I am speaking to, was inadequately dealt with in Committee. We had a debate and a very unsatisfactory answer, so I want to return to it—not at the same length as in Committee, but nevertheless in some detail that might make for uncomfortable listening for different parties in the House.

The idea is for risk assessment and due diligence policies to be used to control and look at procedures on political donations. What is the problem? Dirty money in the UK leaves parties exposed to malign influence, risks fostering dependence on the proceeds of crime and other dubious funds, and undermines the integrity of the electoral system. PPERA does not require UK political parties to run anti-money laundering checks on donors. In fact, there are no indications that parties do robust checks on the source of donations, nor that parties reject donations after such checks have been made. As the UK’s anti-money laundering framework has been progressively tightened over the last decade—I pay tribute to the current Government on this issue, as I have done before—political parties’ minimal checks have become an increasingly glaring anomaly. Examples from the media suggest that if parties check the source of donations at all, they are inadequate and fail to prevent the flow of tainted money into UK politics.

The Electoral Commission has argued since 2018 that risk management principles from anti-money laundering checks by businesses could apply to election finance. In July 2021, the Committee on Standards in Public Life recommended that parties have anti-money laundering style procedures to determine the true source of donations.

How would Amendment 69 address the problem? It would update PPERA to require parties to develop and publish reasonable and proportionate risk-based policies for identifying the true source of donations above £7,500—we are not looking at small donations here. Parties would need to have reasonable and proportionate risk assessment and due diligence controls and procedures in respect of those policies, as provided for in a statutory instrument. For any donation or an aggregate amount exceeding £7,500, parties would need to undertake enhanced due diligence checks, with a simplified process thereafter. Donors giving over £7,500 would need to declare whether their business is in a high-risk sector, which is defined in the amendment, and whether they have been under formal investigation or convicted of certain offences. Parties would need to include a statement of risk management in their annual accounts identifying that.

What have the parties done about due diligence checks on donations? The Committee on Standards in Public Life’s report, Regulating Election Finance, identified broad support for exploring anti-money laundering style regulations from the Liberal Democrats, Labour and the Scottish National Party. Both Labour and the Liberal Democrats agreed that there was merit in exploring this style of regulations but that it would be important to think about how the process would work and the administrative workload involved. The Conservative Party told the Committee on Standards in Public Life that it thought that current regulations for donations were sufficient.

In their response to the Committee on Standards in Public Life’s recommendation that parties should have procedures in place for the true source of donations, the Government said that

“it is very important to balance the need for parties and other campaigners to generate funds against the cost of actually carrying out checks on donations, to ensure they come from permissible sources. We think the current rules are proportionate and achieve this balance.”

When a version of Amendment 69 was debated in Committee—it was rather longer; it is still long but it has been tightened up a bit—the noble Earl, Lord Howe, said that

“all we can do is keep the rules under review. I am suggesting that in this particular area, the balance is about right.”—[Official Report, 28/3/22; col. 1378.]

Let us look at the balance: due diligence checks would be a relatively low administrative workload. If due diligence checks had been required on donations above £7,500 in 2021, the Liberal Democrats would have conducted checks on just 11% of donors, or 72 donations out of 642; Labour on 25%, or 133 out of 536; the Greens on 29.2%, or 19 out of 65; and the SNP on 63%, or seven out of 11. This means that, at most, Labour would have had to do checks on one donation every 2.7 days over the course of a year, and the Liberal Democrats would have had to do one check every five days. Obviously, because some donations come from the same donor, it would probably be less frequent than that.

Now we come to the Conservatives; no wonder we get complaints from the Tory Benches about what is being said. I apologise to the noble Lord, Lord Cormack, but that was a very unfortunate intervention. The Conservatives would have checked 51.5% of donors— 457 donations out of a total of 887 were of £7,500 or more. Of course, this reflects their greater resources, with donations of almost £19 million in 2021—around double what Labour received.

I have three examples of potentially suspect donations. I gave a lot more in Committee, and I stand by them all; they are all there on the record. All major political parties have accepted potentially suspect donations from individuals and companies that were under investigation or later found to be involved in economic crime. The media has reported on a catalogue of such donations, with Spotlight on Corruption providing most of the information. The Conservatives received £2 million in cash donations from Lycamobile, a company whose premises were raided by French authorities in 2016 on suspicion of money laundering, leading to the arrest of the company’s directors. Despite evidence emerging in 2015 that Lycamobile employees were dropping off rucksacks full of cash at post offices across London, the party took a further £587,000 from the company until July 2017.