Elections Bill

Lord Sikka Excerpts

Lords Hansard - Part 1 & Committee stage
Monday 21st March 2022 Lords Chamber

[Baroness Scott of Bybrook (Con)]

Before my noble friend Lord Hayward sat down, the noble Lord, Lord Sikka, rose to intervene. Perhaps we could allow the noble Lord’s intervention.

[Lord Sikka (Lab)]

Thank you very much. I certainly have not come across any evidence to suggest that ID cards are an answer to the problem of voter fraud. I would like to broaden the debate a little and think about the consequences. I grew up in east London, where it was not unusual for people of certain backgrounds to be stopped in the street by the police and asked to show ID, when you are not required to carry any ID. What would happen in this brave new world when the police stopped people and said, “By the way, you now have an official ID. Have you not got it? Can you not bring it from home and report to the police station?” What would be the consequences for the young people who are unwilling or unable to produce those officially sanctioned ID cards? Would that drive a wedge between the police and the community? Would that criminalise people? Would that fuel more dissatisfaction with our parliamentary system? Would that fuel social instability? I would like to hear from the Minister where this ID concern will stop. What would be the broader social consequences? It seems to me that we would be opening up American-type social problems. They would be imported here, because people simply do not have or cannot produce officially sanctioned ID cards.

It is minorities who will be targeted. It is well known and well documented that the police target minorities. They would have a new authority to wield to criminalise minorities. I would love to hear the Minister’s views on that.

[Baroness Noakes (Con)]

My Lords, voter ID is not something dreamed up by the Government with the express intention of suppressing voter turnout, as various noble Lords have come perilously close to suggesting in both today’s debate and our debates last week. I am sure that, as parliamentarians, we all share a belief in the centrality of elections to our democracy and a desire to achieve the highest standards of integrity and participation. I believe that it would be a unworthy slur to suggest that my party believes anything else. The plain fact is that the Electoral Commission has recommended voter ID, as have international election observers. Most European countries require it; Northern Ireland has had it for nearly 40 years.

Elections Bill

Lord Sikka Excerpts

2nd reading
Wednesday 23rd February 2022 Lords Chamber

[Lord Sikka (Lab)]

My Lords, this Bill is part of a power grab by the Government and it is hard to find any redeeming features in it. I cannot support the imposition of photo ID for voting, against which many noble Lords have already spoken eloquently.

Where exactly is the evidence of voter fraud? In 2019, there was a general election, a European Parliament election, local council elections, mayoral elections and police and crime commissioner elections. There were only four convictions and two cautions for voter fraud in all those elections put together.

More importantly, where are the Government’s credentials which show that they are interested in fighting fraud? The Government themselves have seriously facilitated ID fraud on a massive scale. Let me give some examples. For the payment of just £12, anyone from anywhere in the world can form a company in the UK. They can use imaginary names and fictitious addresses—absolutely no authentication check of any kind is made at Companies House. A few days ago, I drew the Government’s attention, through Written Questions, to the names of directors registered at Companies House. These included “Adolf Tooth Fairy Hitler”, “Lord Truman Hell Christ”, “Judas Super-Radio Iscariot”, “Victor Les-appy Hugo” and a “Joseph Smith Jr” who gave his occupation as “Guardian Angel of the Ring of Mormon”, among others. All these were accepted, and these people got certificates of incorporation with which they could open a bank account and connect with the world’s financial systems. In the past 12 years, there has not been a single legislative reform to curb this.

The Government claim that they are interested in fighting fraud. First, they cannot provide evidence of voter fraud. Secondly, their own records show that they have no intention whatever to do so. They are simply seeking electoral advantage by claiming that they are fighting fraud. There is no other reason.

The Electoral Commission tells us that the imposition of photo ID will prevent many people participating in their God-given democratic right. The commission has already fined the Conservative Party for failing accurately to report donations. The revenge has been swift. The Bill neuters the powers of the Electoral Commission and hands them to the Government, who will inevitably use them against campaigners, while those on their side receive less scrutiny.

Scotland uses proportional representation. It would be helpful to know if the Minister is going to force the Scottish Government to abandon that and use the first past the post system. This is what the Government are proposing, for England at least. The UK and Belarus are now the only countries in Europe to use the first past the post system for general elections. It guarantees that a party with minority support will always end up with a huge majority in the House of Commons. This is undemocratic and unacceptable, and must be opposed by all right-minded people.

The ability of trade unions and civil society organisations to engage and campaign is vital to the renewal of democracy and to enabling the voices of people who are marginalised and silenced to be heard. This Bill silences them. It does not advance people’s rights in any way whatever.

People know that the political system is corrupt. It will remain so as long as political parties and individual legislators are funded by private money. Over the years, the Conservative Party has gleefully collected money from Russian oligarchs, smugglers, tax dodgers and other corrupt people. One in three billionaires in the UK donates money to the Conservative Party. But these people do not donate money, they invest—and they expect a return on that investment in the form of compliant laws, toothless regulators, subservient legislators and Governments who keep threatening laws off the political agenda.

The Minister referred earlier to the Political Parties, Elections and Referendums Act 2000 and said that it works pretty well. No, it does not, and I can give him plenty of evidence. I will refer to just one example, which relates to Lord Ashcroft’s donations to the Conservative Party. Some years ago, he donated £5 million while he was a non-dom—in other words, he was not necessarily paying full taxes in the UK. The political contribution was made by a company called Bearwood Corporate Services. It was registered in the UK but had a director and secretary with addresses in the British Virgin Islands. From where exactly was the company controlled? You can guess. This company never had sufficient profits to fund those political donations. Where exactly did the money come from? It came from a company called Stargate Holdings Ltd, registered in Belize and controlled by Lord Ashcroft. To disguise the origins of that money, it was passed through three UK companies—Astraporta (UK) Ltd, Bearwood Holdings and Bearwood Corporate Services. Each was carefully designed to qualify as a small company under the Companies Act, so that it did not have to disclose its political donations. Astraporta and Bearwood Holdings did not trade with any third party and therefore had no profits out of which they could make the donation. It is clear that the law is being subverted and not complied with.

Finally, freeing political parties from corporate money is a necessary precondition for curbing political contributions in this country. I look forward to working with others who seek to achieve this end.

Dissolution and Calling of Parliament Bill

Lord Sikka Excerpts

2nd reading
Tuesday 30th November 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I congratulate the noble Earl, Lord Leicester, on his excellent speech and welcome him to the House. I look forward to his insights on many worldly matters.

I am not a constitutional expert or a lawyer; nor am I a seasoned parliamentarian, as many others on the speakers’ list are. In many ways, I am an outsider and I offer an outsider’s perspective on the Bill. I believe that many of the concerns I will express may be shared by many lay people outside.

There is a broad public perception that Governments pass laws for their own convenience. The Bill ferments those concerns and reinforces them in many people’s minds. It does not enhance the power of the elected Chamber or the people. Possibly, it is all about enabling the Government to make a dash for an election before the glow of the coronavirus vaccine wears off and the consequences of their disastrous management of the economy and Brexit catch up with them.

The Minister referred to a desire to return to some glorious past. Perhaps that past was never really that glorious at all; if we look at the history, we see Governments cutting loose and seeking electoral advantage regardless of whether it was good for the country or not. We all know that the Fixed-term Parliaments Act 2011 was part of the coalition Government’s strategy to remain in office; there was nothing else to it really. The Minister kindly referred to the Labour Party manifesto, so I remind him of the Conservative Party’s 2015 manifesto, which referred to the FTPA as

“an unprecedented transfer of Executive power.”

Presumably now we have an executive grab for power, because all other centres of power are being weakened.

The key factor in the FTPA was that the House of Commons determined the timing of the Dissolution of Parliament. The Bill takes that away and gives the Prime Minister unconstrained power over when to call an election. If a Prime Minister can unlawfully prorogue Parliament, he can also abuse the Dissolution powers. Are there any safeguards in the Bill? It is hard to see any, especially when the courts are excluded and people cannot go to them for any help.

Under the Bill, Parliament can be dissolved by a Prime Minister who is shoehorned into office—in other words, not the leader at the general election and therefore not subject to an earlier verdict of the people. Parliament can also be dissolved by a Prime Minister whose party does not have a working majority in the Commons.

What if the Prime Minister chooses not to dissolve Parliament and to go over five years? Are there sufficient safeguards? I could not really see anything in there to assure me. At least a vote in the House of Commons offered some safeguards against abusive Dissolutions, but all that is swept away. There is nothing to prevent Prime Ministers from behaving as they did in the past: pass a very favourable Budget, bribe the people, and call a general election. We are really talking about returning to the days of electoral bribery without any consideration of the consequences for the economy or the country as a whole, which in itself is an abuse of the Prime Minister’s office.

The Explanatory Notes accompanying the Bill say that

“the Sovereign dissolved Parliament only when requested to do so by the Prime Minister, and in certain exceptional circumstances, the Sovereign could refuse to grant a dissolution.”

I hope that the Minister will tell the public at large what the “exceptional circumstances” are in which a Dissolution may be refused. When did the sovereign last override the Prime Minister’s advice? The Prime Minister basically seems to be in control. We have an adversarial political system, but which representative of the people will be called on to advise the sovereign on whether the circumstances are “exceptional” and therefore the Prime Minister’s request ought to be denied? Without suggesting democratic arrangements, the Bill leaves the sovereign open to a potential charge of political bias and subject to public opprobrium.

Clause 3, as many have referred to, is highly troublesome. It seeks to deny people access to the courts to rule on abusive Dissolutions. The inclusion of the clause suggests that the Government are concerned that people may challenge the Prime Minister’s decision, and that the Government are out to disempower the people. We live in a country where people have access to law and adjudication by the courts on most things, but on the vital issue of the Dissolution of Parliament and Prorogation the people will have no such right. Why are they being denied that right? The Minister referred earlier to elections being verdicts, but it has already been pointed out that the election comes some time after the event of Dissolution; the abuse has already taken place.

If the courts are precluded from adjudicating on the prerogative power of Dissolution, the only check on a rogue Prime Minister is the monarch. However, the Bill does not legislate on the monarch’s powers or offer any transparency or clarity on how those powers might be exercised. The only way to protect the sovereign from party politics and a charge of bias is really to empower the people to go to the courts and to empower the courts to intervene.

Overall, the Bill is part of a worrying trend of centralising power in the hands of the Executive and weakening the powers of Parliament, the courts and the people.

Money Laundering

Lord Sikka Excerpts

Wednesday 24th November 2021 Lords Chamber

Asked by

[Lord Sikka]

To ask Her Majesty’s Government what assessment they have made of (1) the levels of compliance with money laundering regulations by banks in the United Kingdom, and (2) the steps being taken by the Financial Conduct Authority to prevent money laundering.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, the Financial Conduct Authority is the designated anti-money laundering supervisor for banks in the UK. The FCA uses data-led supervision programmes to assess its target firms. It issues guidance so that supervised entities understand the AML risks they are exposed to. The Treasury’s 2019-20 supervision report found that 86% of the 177 financial institutions subject to FCA active supervision were compliant. In instances of non-compliance, the FCA takes robust action to deter future breaches of the regulations.

[Lord Sikka (Lab)]

My Lords, the FCA has secured only one criminal conviction of a bank for money laundering, which was actually volunteered. Numerous leaks, such as the Pandora papers and the Paradise papers, show that UK banks are involved in illicit financial flows, yet the FCA is missing in action. What prevents the Minister commissioning an independent inquiry into the involvement of banks in illicit financial flows?

[Lord Agnew of Oulton (Con)]

My Lords, the noble Lord tells only part of the story. A number of major fines have been imposed on financial institutions in the last few years: Deutsche Bank, £160 million in 2017; Standard Chartered, over £102 million in 2019; Commerce Bank, £37 million in 2020; and Goldman Sachs, £48 million in 2020. We have rigorous oversight and we continue to review it the whole time.

Budget Statement

Lord Sikka Excerpts

Wednesday 3rd November 2021 Grand Committee

[Lord Sikka (Lab)]

My Lords, it is a real pleasure to follow the noble Lord, Lord Balfe. The Chancellor’s Budget will not lead to an economic renaissance, reduce inequalities or improve household budgets.

The word “women” gets just one mention in the Chancellor’s Statement and there are no policies associated with women’s welfare, whether that is reducing the gender pay gap or the pension pay gap, or reducing women’s tax disadvantages. The disabled and pensioners get absolutely no mention in the Chancellor’s speech. The £10 Christmas bonus for pensioners was introduced in 1972 and is still the same. If linked to inflation, it would need to be around £140. The £100 winter fuel payment has not changed since 2011 and, if linked to energy prices, would need to be £153. The Government seem to really have it in for pensioners—they want to hurt them any way they can.

Household budgets are being squeezed by rising energy and food prices, but the Chancellor has not offered any relief by, for example, eliminating VAT on domestic fuel or perhaps offering or considering rent controls. The £4 billion tax cut for banks—from what I could add up—is part of a £54 billion tax giveaway, mainly in the form of tax relief to corporations that are already making billions of pounds in profits. The banks are a good example of that.

The Budget reduces the spending power of households and increases queues at food banks, and that will inevitably undermine the economic recovery. The suspension of the triple lock on the state pension will remove £30.5 billion from pensioners over the next five years, and some 4.4 million families will be worse off by around £4 billion a year because of the cut in universal credit.

Some £8 billion, perhaps more, is removed from household budgets by freezing personal allowances. Consequentially, 1.3 million people, generally the poorest, will be forced to pay income tax. The Johnson tax, which is the name I have given to the 1.25% levy—it does quite nicely on the internet—will remove £85 billion from people’s pockets in the next five years. Income tax begins at £12,570, but the Johnson tax is levied on an incomes from £9,500. People who do not earn enough to pay income tax have to pay national insurance and the Johnson tax. The IFS has pointed out that the Government’s relentless squeeze since 2010 will make the average worker almost £13,000 a year worse off by the middle of the 2020s compared with pre-2008 financial crash growth in wage rates.

The Government like tax perks for the rich. Capital gains are taxed at a lower rate than earned income. Dividends are taxed at a lower rate than earned income. I hope the Minister will tell us why is it that no national insurance is levied on recipients of unearned income. If it were levied, it could go a long way towards addressing many of our social problems. I have asked that question of a number of Ministers, but nobody has answered. I hope that we get an answer today, and I am looking forward to it.

Even before the pandemic, the poorest 10% of households paid 47.6% of their income in direct and indirect taxes, compared with 33.5% by the richest 10%. The Budget has increased that burden, so I have another question for the Minister. Can he explain why the poorest continue to be targeted by the Government? What is to be achieved by increasing their tax burden even more?

The Chancellor said a lot about growth and productivity as the UK lags in international league tables. We have had more than a decade of low inflation, low interest rates, low wages and low corporate taxes, but that has not delivered the much-needed investment. UK investment in productive assets is around 16% of GDP, which is almost the lowest in Europe. When the opportunity arises, I hope that, on another day, I will be able to advance my thesis about why the UK remains in the doldrums.

Historically, the UK economy has been built by the public and private sectors. UK businesses have not shown a great deal of appetite for risky investment, which is why the state had to shoulder the burden and build airlines, telecommunications, biotechnology, nuclear and computer industries. It also had to rescue and reinvigorate railways, water, gas, electricity and many other industries. However, when you withdraw the state from that arena you do not really progress that much. What is the Government’s response? It is to reduce R&D spending by £2 billion to £20 billion. We are told that by 2024 they will spend about 1% of GDP on R&D. That is almost the lowest government spend in Europe, and it is again highly problematic. It will not deliver high productivity and growth.

The Government’s mishandling of Brexit is holding back the economy. The OBR said that

“supply bottlenecks have been exacerbated by changes in the migration and trading regimes following Brexit. Energy prices have soared, labour shortages have emerged in some occupations, and there have been blockages in some supply chains. These can be expected to hold back output growth”.

Yet the Chancellor offered no remedies for these structural problems.

The much-hyped policy of free ports did not get much endorsement from the OBR either. It said:

“There is also broader uncertainty around how much of the economic activity that takes place within a freeport will have been displaced from other UK regions and how much is genuinely additional.”


The major winners from the Budget are tax-dodging, champagne-sipping bankers on short-haul flights. For most people it is a continuation of austerity. That will inevitably increase social instability.

Health and Social Care Levy Bill

Lord Sikka Excerpts

2nd reading & Order of Commitment discharged & 3rd reading
Monday 11th October 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I declare my interests as set out in the register. I am an unpaid senior adviser to Tax Justice Network and will be referring to some taxation issues.

I cannot support this bad and cruel Bill. It does not address the Government’s failures on social care or the NHS. Local councils, which are responsible for social care, have seen their budgets plummet by up to 38% in real terms, and the Bill still does not provide the funding needed to reduce the NHS queues or improve social care. It does not create an integrated healthcare system in which social care is free at the point of delivery. It does not challenge profiteering by private equity, hedge funds and corporations from their involvement in social care and the NHS.

The 1.25 percentage point hike in national insurance, which I would like to popularise as “the Johnson tax”, as that is what we should be calling it, hits the poorest the hardest. Following the Bill, people’s wage packets will show deductions for three direct taxes: income tax, national insurance contributions and, from 2022-23, the newly invented health and social care levy, better known as the Johnson tax in many circles. This is from a Government who promised that there would be no increase in income tax or national insurance contributions.

Before the pandemic, the poorest 10% of UK households paid 47.6% of their income in direct and indirect taxes, compared to 33.5% by the richest 10% of the households. This regressive Bill does not provide any relief for the people at the bottom of the pile. People on the minimum wage will pay the additional national insurance. An employee on a £20,000 wage would pay £130.40 more each year, an effective increase of 10% in the amount of national insurance. This is in addition to the higher income tax which they will need to pay because the Government have frozen the personal allowances, while, at the same time, universal credit is cut by £1,040 for 5.5 million people. Did the Government ever wonder how people will survive? What will happen to social stability?

Many retirees are already struggling on the average state pension of around £8,100 a year and have sought to supplement this meagre pension through part-time jobs. This Bill will force retirees to pay more national insurance on their earned income. The national insurance hike will reduce people’s spending power and have a negative impact on the local economy and household budgets. Levelling up it is not; kicking down it certainly is.

The Government’s PR machine has made much of the 1.25% increase in dividend tax from April 2022. After the increase, dividends will be taxed at marginal rates of 8.75%, 33.75% and 39.35%, compared to marginal rates on earned income of 20%, 40% and 45%. So the tax privileges of the rich continue. At the same time, those receiving unearned income in the form of capital gains and dividends will pay zero national insurance, because it is not charged on unearned income.

Earlier in the debate, the noble Lord, Lord Eatwell, referred to the HMRC policy paper Health and Social Care Levy, which states:

“There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”


Why are the Government hell-bent on hitting the poorest when they will also be facing higher inflation, including higher food and energy prices?

The Government claim that the national insurance hike will raise an additional £11.4 billion a year over the next three years. This could easily have been done without hitting the less well off, and in ways that reduced inequalities and unfairness. Earlier, the Minister said that there is no alternative other than borrowing. He is 100% wrong. For example, by taxing capital gains at the same rates as earned income, the Government could have raised an additional £17 billion a year, plus national insurance contributions of £8 billion. This reform alone would have generated more than double the amount generated by the Johnson tax. The capital gains tax regime benefits only 265,000 taxpayers, mostly resident in London and the south-east of England, so that reform would also have reduced regional inequalities. Again, the Government do not really wish to address that.

By taxing dividends in the same way as earned income, another £5 billion a year in revenue could have been raised, plus the increase in national insurance contributions possibly hitting between £600 million and £1 billion.

I ask the Minister to explain why billions of pounds in unearned income from the sale of second homes, speculation on stock markets and dealings in foreign exchange, commodities, artworks, land and other markets are not subject to national insurance. Does he agree that those tax perks for the rich are unfair and should be eliminated altogether?

Currently, employees generally pay 12% in national insurance on incomes up to £50,270. As other noble Lords have pointed out, the rate on incomes above that is only 2%. This means that high earners pay a lower proportion of their income in national insurance compared to the less well off. By extending the 12% rate to all earned income—just earned income, not including what could be collected from unearned income—an additional £14 billion a year could be raised. Again, the Government do not wish to do that.

I ask the Minister once again to explain why he is content with such a regressive system of national insurance, and why the Government have chosen to hit the less well off rather than inconvenience the rich.

Let us look at the tax relief on pension contributions. Around £41 billion a year is given; most of it goes to people on 40% or 45% marginal rates. Some 1.5 million people get zero tax relief on their pension contributions because their income is less than the personal allowance. Simply ensuring that everybody gets just 20% credit—equivalent to the basic rate of income tax—would leave the Government £10 billion spare.

I have referred to only four ways of raising tax revenues to fund social welfare without adding anything to the basic rate of income tax, the 40% rate of income tax or national insurance contributions for the masses. There are dozens of other ways and if I had more time I would be delighted to go through them. Hurting the less well off is a deliberate choice by the Government, because they have numerous other options available. I cannot really support the Bill as it is very cruel and bad.

Government Departments: Non-Executive Directors

Lord Sikka Excerpts

Wednesday 8th September 2021 Lords Chamber

[Lord True (Con)]

My Lords, the Government obviously respect the recommendations in any report from the Committee on Standards in Public Life, and we will consider and respond to those recommendations in due course. I believe that talent is not confined to people of a single political opinion. Therefore, I do not follow the noble Lord in the implication that anybody who has ever supported the Conservative Party should be disqualified from one of these roles.

[Lord Sikka (Lab)]

My Lords, the Government have adopted a model of non-executive directorships which has been used at BHS, Carillion, crashed banks and other scandal-ridden entities. The non-executive directors there were friends of executive directors; they lacked independence and were ineffective. If the Government are to persist with non-executives, can the Minister give an undertaking that they will be directly elected by employees and users of the services of the relevant departments?

[Lord True (Con)]

No, my Lords, I cannot give such an undertaking.

Covid-19 (Public Services Committee Report)

Lord Sikka Excerpts

Thursday 22nd July 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the noble Baroness, Lady Armstrong of Hill Top, for this debate and the Public Services Committee for its immensely insightful report. Future generations will wonder how their Government permitted nearly twice the number of their citizens to die during the Covid pandemic than all the civilians who died during the Second World War. Yes, we need to transform public services, but that cannot be done without transforming politics, and economic and social policies. We need a visible politics of care and compassion. The fact that the Prime Minister was comfortable with 83,000 Covid fatalities in the age group 18 or over is really a sad low point in British values. Front-line workers, including hospital staff, care home workers, transport staff and retirees feature disproportionately on the Covid death list.

As Sir Michael Marmot’s recent report demonstrates, the main reason is that, due to low incomes, people have poor access to good food, housing, healthcare and personal space. The pandemic has shown us that poverty and inequalities cause death, but the Government have done little to check that; indeed, they continue with their wage freezes, without any impact assessment on the lives of people or the capacity of the country to manage pandemics. In 1976, the workers’ share of the gross domestic product was 65.1%, and just before the pandemic it dropped to 49.4%—a decline unmatched in any other industrialised country. The average wage was stagnant in the decade preceding the pandemic. This economic legacy has weakened the people’s resilience to pandemics. Many people tested positive for Covid but could not find a safe place to isolate, as they lived in cramped accommodation, all because they are poor.

To manage pandemics, countries need institutional memories and capacities; we lack both. The NHS lacked investment before the pandemic. To manage the crisis, the Government hired expensive and often ineffective private sector consultants for their test and trace programme, which has not augmented the long-term capacity of the NHS. Consultants quickly enter and exit an organisation and leave little trace of their activities. This makes it harder to build a pool of experience and draw lessons.

The Government need to look at their own obsession with privatisation, a key factor in the deaths in care homes. Since 2010, central government grants to local authorities have been cut by 38% in real terms; this accelerated the privatisation of social care. In care homes owned by private equity, nearly 11% of revenues vanish in servicing contrived debt. Private equity also expects a return of 12% to 14% on its investment, which meant that 20% to 25% of the revenues of private equity disappeared in returns, leaving very little for care home residents. Care home workers and residents suffered. Of the 1.49 million workers in care homes, only 50% are full time—nearly 24% are on zero-hour contracts. Almost 42% of the domiciliary care workforce is on zero-hour contracts, and staff turnover is nearly 30%.

In March 2020, the real-term median hourly pay of staff was just £8.50 an hour. In these circumstances, it is difficult, if not impossible, for carers to get to know patients and provide personalised care. Low-paid staff cannot afford to isolate or take time off to recover. It is hard to recall any government concerns about the negative outcomes from privatisation of social care. We cannot build capacity to tackle future pandemics by just creating poverty.

The Government’s economic policies are also creating new dangers and diseases—just look at the water industry, where almost every water company has been fined for anti-social practices. Southern Water is the latest example. The company illegally dumped tonnes of raw sewage into rivers and seas, increasing the likelihood of diseases. Its directors calculated that it was better to pay fines than to treat the sewage, so they dumped it. The puny £90 million fine is no deterrent: Southern’s chief executive has just received a bonus of £551,000 for boosting profits. I cannot recall seeing any health impact that accompanied the Government’s two-thirds cut in the Environment Agency’s budget or deregulation, which expects water companies to self-report their illegal practices.

I hope the Government will reflect on how their political, economic and social policies have inflicted death on thousands and sadness upon millions of innocent people, but I am not too optimistic.

Finance Bill

Lord Sikka Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 8th June 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I draw attention to my entry in the register of interests. I am an unpaid adviser to Tax Justice Network. Tax justice is the theme of my remarks today.

A key requirement for building a just and sustainable society is for people to have good purchasing power with which to buy goods and services and to stimulate the economy. This simple truth is neglected not just in this Finance Bill but in many previous Bills. The Bill depresses people’s purchasing power. The current tax-free personal allowance of £12,570 has been frozen until 2026, as have income tax thresholds. The net effect is that one in 10 adults will pay a higher rate of income tax, with the poorest ending up paying a higher proportion of their income in tax. This measure alone removes some £19 billion of spending power from households. It will condemn many to a great deal of insecurity and difficulty.

Regressive taxation has been normalised in each year’s Finance Bill. The TaxPayers’ Alliance estimates that the poorest 10% of UK households now pay 47.6% of their income in direct and indirect taxes. This compares with 33.5% by the richest 10% of households. Because of wage and benefit freezes, zero hours contracts and job insecurity, this gap is now much bigger than in 2010. The Government need to examine why their policies continue to hurt the poorest in our society. They increased VAT to 20%; this is a regressive tax which hits the poorest hardest. There is no proposal for reform in the Finance Bill.

Council tax is regressive. This year, it has increased in the range 3% to 5%. Virtually the same council tax is paid on a property worth £3 million as on one worth £350,000, without any regard for any ability to pay. The poorest tenth of our population pays 80% of their income in council tax, while the next 50% pay 4% to 5% and the richest 40% only pay 2% to 3%.

There is no reform of national insurance contributions —another regressive tax. Employees generally pay 12% of their monthly incomes between £797 and £4,189 in contributions. Above that, the rate is an additional 2%. Inevitably, the rich pay a lower proportion of their total income in national insurance, compared to the poor.

Unlike the noble Lords, Lord Leigh of Hurley and Lord Bilimoria, I cannot support the capital gains tax regime. Why on earth do the rich need a special tax regime? Capital gains are taxed at marginal rates of between 10% and 28%, whereas earned income is taxed at marginal rates of between 20% and 45%. Both increase somebody’s welfare and purchasing power. I can see no rationale whatever for taxing capital gains at a lower rate than earned income.

The Government’s policies on capital gains are also a bonanza for the tax avoidance industry. Armies of accountants and lawyers are busy converting income to capital gains so that their clients end up paying lower taxes. By taxing capital gains in the same way as earned income, the Government could raise around £14 billion a year. This could help the less well off by making the £20 a week universal credit permanent; the Government could also easily double it by this one simple reform.

There is tax relief of around £40 billion a year on contributions to pension schemes. Just 10% of high earners receive 50% of tax relief. There are 1.3 million individuals who pay into pension schemes but receive no tax relief and zero government support. This is because their income is less than the tax-free personal allowance. Again, the poor are being punished, for putting a little away for their retirement income.

I hope the Minister will explain why the Government insist on hurting the poorest with regressive tax policies. Just in case he is tempted to defend government policies by claiming that, in recent years, they have increased tax-free personal allowances, I remind the House that this has not changed the burden of tax on the poorest. Increasing the personal allowance has done nothing for 18.4 million individuals whose annual income is less than the personal allowance. We need a rethink if we want a just society.

The report, New Powers for HMRC: Fair and Proportionate? is very impressive, but I cannot help wondering whether the committee has not been hoodwinked by the Government and the tax avoidance industry. On page 3, the report states:

“On the proposals for tackling promoters of mass-marketed tax avoidance schemes, we welcome the Government’s intention to take further tough action against the known ‘hard core’ of promoters, but urge it to redouble its efforts in this respect, and to take further measures to combat the continued proliferation of new schemes.”


Where exactly is the evidence for tough action? There is an enormous difference between the law on the books and the law in practice. The Government have been soft on the tax avoidance industry. Big accounting firms have long raided the public purse through complex tax avoidance schemes. Occasionally HMRC goes to court, but the Government do not take any action against the firms.

Let me give some examples. The UK Supreme Court heard the case of HMRC v Pendragon plc and others. The case related to a VAT avoidance scheme marketed by KPMG, which would have enabled car retailing companies to recover VAT input tax paid while avoiding the payment of output tax. The court declared the scheme to be unlawful and the judge said:

“In my opinion the KPMG scheme was an abuse of law.”


That is a very strong conclusion. To this day, no action has been taken by any regulator or accountancy trade association against KPMG.

The court judgment in Development Securities plc and others v HMRC threw out a complex PwC scheme designed to shift apparent management control of some UK entities to Jersey to gain tax advantages by claiming that the entities were not liable to the UK taxes. The scheme was declared to be unlawful by the courts, but no action was taken against PwC.

An Ernst & Young scheme involved loans between companies in the same group, and the ultimate aim was to enable a company making the interest payment to claim tax relief on the expense while enabling the company receiving the interest to avoid tax. That scheme was sold to Greene King. After a prolonged legal battle, the scheme was declared to be unlawful. No action was taken against Ernst & Young.

Deloitte promoted a scheme to enable companies to generate deductible tax losses through complex financial transactions. The scheme was sold to Ladbrokes, but it gambled incorrectly and the court said that the scheme was unlawful. No action of any kind whatever was taken against Deloitte.

Big accounting firms have been peddling unlawful tax avoidance schemes and are not investigated, fined or disciplined but are given government contracts and seats on HMRC’s boards. The advisory panel on the general anti-abuse rule, GARR, is also dominated by the same people. Amazingly, none of the GARR panel’s rulings relate to any of its clients.

In sum, I question the claim that tough action against accounting firms for selling tax avoidance schemes has been taken. I invite the Minister to explain why big accounting firms peddling unlawful tax avoidance schemes have not so far been investigated, fined disciplined or prosecuted.

Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014

Lord Sikka Excerpts

Thursday 22nd April 2021 Lords Chamber

[Lord True (Con)]

My Lords, I agree that transparency is important; that has been a standard across the House. Ministers’ and Permanent Secretaries’ appointments are published. Obviously, there is ongoing review of this work, not only by the Government but by a number of parliamentary committees. I am sure what my noble friend said will be noted.

[Lord Sikka (Lab) [V]]

My Lords, while it is right to constrain the power of lobbyists and former Ministers renting themselves out, the real cancer at the heart of our politics is corporate money and power, which fund political parties and legislators to gain unfair advantage in public policy-making. Is the Minister concerned? If so, what legislation will he propose?

[Lord True (Con)]

The noble Lord is the antithesis to capitalism. The remarkable success of private companies in procuring vaccines for the safety of our people is something for which I am profoundly grateful.