Taxation (Energy and Vehicles) Bill

Lord Sikka Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 14th July 2026 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I will confine my comments to Clause 1, which will increase the rate of the electricity generator levy from 45% to 55%. I fully support this increase and wish it had been higher.

Despite various initiatives mentioned by the Minister, Ofgem’s marginal pricing system remains fundamentally flawed. It ultimately determines consumer prices and, in the process, showers profits on companies generating electricity. The Ofgem cap is not based on average cost or a weighted average cost of all the inputs, or indeed on any notion of actual cost. One of Ofgem’s objectives is to ensure profit for each supplier at each stage—at generation, transmission, distribution and retail. This means that the Ofgem cap is set at the most expensive price or cost per unit, otherwise the marginal producer—the most expensive producer—cannot make a profit. This is the reverse of what happens in competitive markets, where the most expensive producer is driven out of business.

Ofgem’s pricing formula is a boon for companies generating electricity from oil, nuclear, renewables, solar, wind, hydro and other forms of inputs, because they are paid the price of electricity produced from gas, which is usually the most expensive input. The Bill does not reform Ofgem’s pricing formula. It does not fully decouple the price of gas-produced electricity from the rest. Instead, it takes a little more in excess profits via the levy. Even with a 55% levy, electricity generators will still be able to keep 45% of the excess profits manufactured by a flawed Ofgem formula. They have already kept billions in excess profits. What is the excuse for letting them keep still more?

The Government’s rationale is that the revenues resulting from this Bill will help to subsidise some businesses and households. But it will not help all households and all businesses and it does not provide long-term relief from profiteering by energy companies. A study by Unite reported that, since the pandemic, electricity and gas supply companies have increased their profit margins by 363%, and electricity generation companies have increased their profit margins by 198%. But successive Governments and Ofgem have made no attempt to reduce the profit margins of electricity generators. I hope the Minister will comment on this.

Can he also explain why Ofgem’s marginal pricing system has not been abandoned and why the price of gas-produced electricity has not been fully decoupled from the rest? Can he explain how much excess profit has been facilitated by Ofgem’s pricing formula and what proportion has been or will be recovered by the electricity generator levy?

It is worth noting that returns to energy investors are much higher because of flawed UK tax laws. I will provide some background before the detail. The background statistics are that 80% of UK offshore wind generation is foreign owned. The largest onshore wind farm in Wales is owned by a Swedish entity, EDF is 100% owned from France, E.ON is based in Germany and Scottish Power is owned by a Spanish multinational. The shareholders of their UK operations, mostly based abroad, receive billions in dividends without deduction of tax at source. In other words, they pay no tax whatever on those dividends. This results in huge loss of tax revenues that could help the Government to increase support for energy customers. Countries such as the US, Australia and Sweden deduct a withholding tax at source on dividends paid to foreign investors. They make a distinction between investors resident in tax- treaty countries, EU countries and non-co-operative tax havens. Can the Minister explain why the Government do not do the same and why they are content to forgo billions in tax revenues by not having a withholding tax?

I am also concerned about the lack of good energy infrastructure. Since privatisation, National Grid has paid £28 billion in dividends, plus millions more in share buybacks, but we do not actually have a good energy infrastructure. This is similar to the woes of the water industry. This week, it has been reported that Britain’s biggest community solar project has been forced to shut for the duration of its first summer by the Government’s energy system operator to avoid overloading the local grid with renewable energy. During periods of high wind, the Government pay companies up to £180,000 an hour to switch off wind turbines. At the same time, gas plants are paid extra to produce more electricity to balance the system and meet demand. For the period September 2021 to April 2025, the cost of balancing the electricity grid came to £11.8 billion and it is expected to hit £8 billion a year by 2030. Can the Minister explain why, after 36 years of privatisation, National Grid and other energy companies are not penalised for failing to provide a good and reliable electricity transmission and storage system? I look forward to hearing the Minister’s reply.

Covid Fraud

Lord Sikka Excerpts

Monday 29th June 2026 Lords Chamber

[Lord Livermore (Lab)]

The Government have been clear that we expect robust action to be taken to protect the taxpayer, and we have fully supported the appropriate legal and insolvency processes being followed. As I understand it, PPE Medpro Ltd is now in liquidation, and matters related to the recovery of funds are therefore for the liquidators to pursue in line with their statutory duties. Any recoveries that can be made will be determined through those independent processes. It would not be appropriate for me to comment on those proceedings.

[Lord Sikka (Lab)]

My Lords, one of the problems with the commissioner’s report on Covid fraud is that it pays little attention to the role of consultants in devising various schemes. For example, the furlough support scheme did not ask companies to provide the national insurance numbers of employees; it was, therefore, open to fraud. Companies seeking loans were not required to say when they were formed and what their HMRC reference number was; again, it was open to fraud. Are the Government still using the same consultants? Have they taken any action to ensure that those consultants pay the price for the poor design of various schemes?

[Lord Livermore (Lab)]

I am afraid I do not know whether we are still using the same consultants; I am more than happy to check for the noble Lord.

HBOS: Fraud Investigation

Lord Sikka Excerpts

Thursday 26th March 2026 Lords Chamber

Asked by

[Lord Sikka]

To ask His Majesty’s Government what assessment they have made of the adequacy of Lloyds Bank’s investigation of fraud at HBOS; and when they expect Dame Linda Dobbs’s review of the fraud to be completed and published.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, in 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, which took place in the early 2000s, and to determine what it knew or should have known and whether it reported it appropriately to the regulatory authorities. The Government understand that drafting is under way, and the review’s findings will be shared with the Financial Conduct Authority once completed, which will then consider what actions are appropriate to take.

[Lord Sikka (Lab)]

My Lords, I thank the Minister for his reply. It would be helpful to have a bit of background. Fraud at HBOS goes back to 2002. The regulators did little. In 2017, the Thames Valley Police and Crime Commissioner secured six criminal convictions. Still the FCA, SFO and the police did not fully investigate. The Government left it to Lloyds Bank, which owns HBOS and which then appointed Dame Linda Dobbs to investigate and prepare a report. There has been no report to date. Victims are still awaiting compensation, and many have died since. Does the Minister agree that it is a government duty to deliver justice to victims of bank fraud?

[Lord Livermore (Lab)]

The Government share the frustration at how long processes relating to this issue are taking to conclude. In 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, what it knew or should have known, and whether it reported it appropriately to the regulatory authorities. The noble Lord mentioned the FCA. The FCA has undertaken an investigation into this matter historically and has taken enforcement actions. The FCA previously investigated and, with the PRA, jointly reported on the failure of HBOS. There was a criminal investigation resulting in six convictions in 2017. The FCA investigated knowledge of these matters with HBOS and its communications with the FCA after the initial discovery of the misconduct. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested, and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate with Parliament. The Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude.

Reducing Government Spending

Lord Sikka Excerpts

Tuesday 24th March 2026 Lords Chamber

[Lord Eatwell (Lab)]

My Lords—

[Lord Sikka (Lab)]

My Lords—

Spring Forecast Statement

Lord Sikka Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Sikka (Lab)]

My Lords, what a heroic task this Chamber has undertaken in us having seven minutes to explore 560 pages of the Finance (No. 2) Bill, 481 pages of Explanatory Notes, 131 pages of related OBR analysis and 152 pages of Treasury statements and related policies. On top of that, there is a Spring Statement and its related documentation—and if you can get through the legalistic jargon, you are doing very well.

I welcome the abolition of the two-child benefit cap but would like to see greater emphasis on lifting parents and families out of poverty. Sustained economic growth cannot be achieved without good purchasing power for the masses.

The perpetuation of the Conservative policy of freezing annual income tax personal allowances for another three years will actually create more poverty. The number of basic rate taxpayers has increased from 26.6 million in 2021 to 30.4 million in 2025-26. These are the very people facing a cost of living crisis. The number of people over state pension age paying income tax has jumped from 6.47 million to 8.72 million. Some 25.3 million individuals live below the minimum living standard. There is no such thing as trickle-down economics. The rich have gobbled it all up and people at the bottom just buy worry beads; that is about all they can do. Some 120,000 people a year die in fuel poverty. Despite the triple lock and pension age benefits, almost one in six pensioners die in poverty. It would be helpful to hear the Government’s plans for the equitable distribution of income and wealth.

It is also disappointing that a regressive tax system remains in place. Wages are taxed at the marginal rates of 20% to 45%. In addition, national insurance contributions are levied, starting at the rate of 8% on eligible wages. In contrast, despite the changes, dividends are taxed at the rate of 8.75% to 39.35% and capital gains at rates of 18% to 32%, and the super-rich do not pay any national insurance on either of those elements. The poorest 20% pay a higher proportion of their income in direct and indirect taxes than the richest 20%. Can the Minister explain why the poorest are paying a higher proportion of their income in taxes than the richest? Is that equitable?

The student loan system remains a maze of confusing interest rates, repayment thresholds and repayment rates. It is disappointing that the repayment threshold for plan 2 student loans will remain frozen at £29,385 until April 2030, or maybe even longer. By then it will be closer to the minimum wage and way below the median wage. More graduates will be forced to repay earlier, leaving less for those wanting to buy a home or start a family or a business. Graduates with modest earnings of £31,000 a year, which is way below median wage, face a deduction at the marginal rates of 42% at the moment. That is 20% in income tax, 8% national insurance, a 9% loan repayment on income above the repayment threshold and a modest 5% contribution to a pension scheme. Does the Minister think that this rate of marginal taxation is conducive to economic growth? Would it not really be better to stimulate people’s purchasing power by abolishing tuition fees and finding a way of writing off the student debt?

HMRC’s own estimate of tax gaps suggests that between 2010 and 2024, it failed to collect around £500 billion in taxes, while alternative models put the figure at £1,400 billion. It is therefore good to see that the Government are focusing on tax avoidance. However, at the same time the Government are creating opportunities for tax avoidance: by taxing capital gains and dividends at lower rates than wages, the Government are perpetuating tax avoidance opportunities. The tax avoidance industry will inevitably arbitrage, helping the super-rich to convert income to dividends and capital gains.

I welcome the national insurance and related tax relief changes on employer salary sacrifice pension contributions and urge the Government to crack down on employer national insurance avoidance, especially by limited liability partnerships. Companies pay employer national insurance on directors’ salaries. The role and position of LLP partners is no different from that of a company director, but they receive a share of profits instead of salaries. Therefore, the firm does not pay employer national insurance. This perk enables a firm—effectively its partners—to dodge around £148,000 of national insurance for every £1 million of profit shared by partners. In 2024 the big four law firms in the City of London dodged £4 billion of employers’ national insurance. Billions more are dodged by other LLPs.

Drivers and other staff at companies such as Amazon, Evri and eCourier are treated as self-employed, even though they receive almost all their income from one source and instructions from that same source as well. As self-employed workers, they are responsible for their own tax and national insurance but one consequence is that through such arrangements, companies escape paying employers’ national insurance altogether. Can the Minister explain why the Government tolerate this kind of organised national insurance avoidance and when a crackdown will begin?

Autumn Budget 2025

Lord Sikka Excerpts

Thursday 4th December 2025 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I welcome the scrapping of the Conservative two-child benefit cap. Sustained economic growth is a key objective, but that cannot be achieved by eroding the spending power of the bottom 50% of the population. There is no justification for freezing the income tax threshold until 2030-31. This freeze forces 780,000 additional people—that is, the poorest—to pay income tax for the first time. Another 920,000 will be pushed into paying income tax at a higher rate. Some 24 million people already live below socially acceptable living standards, and the freeze would lengthen queues at food banks.

Just one change—taxing capital gains at the same rate as wages—could have raised around £14 billion and enabled the Chancellor to increase income tax personal allowances by more than £1,000 a year, reduce poverty and stimulate the economy. However, the Government chose to appease the rich. There is no increase in the top rate of income tax. Dividend and capital gains will still be taxed at lower rates than wages. The poorest 20% will pay a higher proportion of their income in taxes than the richest 20%. Just 1% of the population will continue to have more wealth than 70% of the population combined. That is utterly unfair.

Energy companies have made £125 billion in profit since 2020, directly fuelling poverty, but there are no curbs on profiteering and no windfall taxes. The big four banks made pre-tax profits of £45.9 billion in 2024, but there are no windfall taxes. Even worse, banks receive a hidden subsidy of over £23 billion a year in the form of interest payments on central reserves. Since 2023, the European Union has mostly stopped paying interest on central reserves to banks. The Budget makes no attempt to curb corporate welfare payments. Can the Minister explain why the Government continue to subsidise banks?

Direct investment by the state in infrastructure remains neutered. Instead, it is channelled through PFI-type arrangements. For every £1 of private investment, the Government repay £6, which is very poor value for money. Such policies guarantee corporate profits but have not stimulated growth. They burden the public purse and public bodies with extortionate costs. There are alternative ways of funding these investments. The UK invests around 19% of its GDP in productive assets, compared with 26% for France and 25% for Germany. The average for OECD countries is 23%, while China invests 40.4% and India invests 30.5%. Despite low investment, there is no reform of corporate governance and no attempt to curtail shareholders’ ability to extract vast dividends, as we have seen in the water industry, for example.

Inequalities, profiteering, regressive taxation and neutering of public investment do not provide firm foundations for the economy. We need a Budget for the masses, not just for the super-rich, bond markets and corporations.

Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Sikka Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the noble Lord, Lord Elliott of Mickle Fell, for securing this debate. In an often-told story, Albert Einstein set an exam paper for his graduate class. One of his colleagues noticed that the questions were the same as on the previous year’s exam paper. He asked how the great man could set the same exam again. Einstein smiled and said:

“But the answers have changed”.


This parable captures the problem of the UK economy. For the last 20 to 30 years, we have faced the problem of low economic growth, investment and productivity, rising poverty, and crumbling infrastructure. But Governments provide the same old answers: privatisation, outsourcing, unchecked profiteering, real-wage and spending cuts, regressive taxation—and the ideology that direct state investment in new industries and infrastructure must be neutered. Inevitably, the economy struggles. We now have a rentier economy, where the state guarantees profits for water, energy, care homes, private healthcare, internet companies, prison services and much more.

Despite low rates of inflation, interest and corporation tax, and generous incentives, investment in productive assets remains disappointing. In the age of deindustrial- isation, the UK has been at the bottom of the G7 league for investment in 24 out of 30 years to 2022. It is ranked 28th for business investment out of 31 OECD countries. It is currently investing 18.2% of GDP in productive assets, compared with 26% for France and 25% for Germany. The OECD average is 23%. China spends 40.4% and India spends 30.5%. One lesson is that economies flourish with direct state investment in infrastructure and new industries; this also benefits the private sector.

The City of London never had an appetite for long-term risks. The stock market functions as a cash-extraction machine. In 2024, listed companies raised £25.3 billion in new shares and paid out £91.2 billion in dividends and another £57.1 billion in share buybacks. Companies sweat assets. No Government have tackled short-termism, or the power of shareholders to extract returns. Good purchasing power for the masses is essential for economic growth, but that has been eroded. The average real wage has hardly changed since 2008. Some 16 million people live in poverty, and 24 million live below socially acceptable living standards. The bottom 50% of the population owns less than 5% of wealth, and the bottom 20% has less than 0.5%. The bottom 20% pays a higher proportion of income in tax than the richest 20%.

You cannot squeeze 50% of the population and expect economic growth: that does not happen anywhere, so why on earth did the last Government pursue that strategy? Somebody ought to explain. The UK has the wrong model for economic growth. Equitable distribution of income and wealth, progressive taxation, and bigger public investment are necessary prerequisites to building a sustainable economy. I urge the Government to follow that course.

National Insurance: Partnerships

Lord Sikka Excerpts

Monday 10th November 2025 Lords Chamber

[Lord Livermore (Lab)]

I applaud the noble Lord’s attempt at his question. I am not going to comment on individual tax measures right now.

[Lord Sikka (Lab)]

My Lords, whether someone trades through a company or a partnership is a personal choice. That choice should not be incentivised by the national insurance system. It is wrong to hand incentives to rich accountants and lawyers to dodge employers’ national insurance just because they trade as partnerships. That differential treatment encourages abuse and avoidance strategies. Does the Minister agree, and if not, can he give reasons?

[Lord Livermore (Lab)]

My reason is very simple: I am not going to speculate on the next Budget now. I am, of course, grateful for my noble friend’s expertise in these matters.

GDP Per Capita

Lord Sikka Excerpts

Monday 20th October 2025 Lords Chamber

[Lord Livermore (Lab)]

That is a very long question but I can give the noble Lord a very short answer. Yes, of course, I agree with him. It is very important that we retain our high earners and retain as much talent in this economy as we possibly can.

[Lord Sikka (Lab)]

My Lords, the equitable distribution of income to enable people to buy goods and services is essential for sustained economic growth, but all is not well. At Melrose, the CEO to average worker pay ratio is 1,112; at Tesco 375; at Marks & Spencer 261; at Associated British Foods 218; and 195 at Sainsbury’s. In view of this scale of inequity, what is the Government’s plan to secure equitable distribution of income for workers and, in doing so, also secure economic growth?

[Lord Livermore (Lab)]

Clearly, we need to make sure that we retain top talent in this country, as the previous questioner asked me about, but we also need to make sure that we increase the living standards right across the income distribution, and particularly for working people. My noble friend will know that wages continue to grow and that in the first 10 months of this Government, real wages rose more than in the first 10 years of the previous Government.

Economic Growth

Lord Sikka Excerpts

Tuesday 16th September 2025 Lords Chamber

[Lord Livermore (Lab)]

The answer to the first of the noble Baroness’s questions is no. As for the second question, she says she is interested in growth but let us look at just one measure that we are taking. Our planning reforms have the largest impact on growth of any non-fiscal measure the OBR has ever scored. Yet her party, evening after evening in this place, is doing every single thing it possibly can to hold up and obstruct our planning Bill in your Lordships’ House. Is that the action of a party that wants to grow the economy? Our capital spending increases economic growth. In this month’s GDP figures, we can see the effect it is having on driving new infrastructure work. Yet her party opposes the changes to the fiscal rules that make that possible. She says she wants growth but at every single turn, she opposes the measures this Government are taking to get that growth.

[Lord Sikka (Lab)]

My Lords, people’s inability to buy goods and services is a major reason for low economic growth, and 14 years of Conservative rule delivered real wage cuts, the two-child benefit cap, frozen income thresholds, and unchecked profiteering. Some 16 million people live below the poverty line. What plans do the Government have to abandon Conservative policies and deliver redistribution of income and wealth, and curbs on profiteering?

[Lord Livermore (Lab)]

My noble friend is absolutely correct to say that we need a different approach to the economy from the one we had over the past 14 years, and he will have seen how we are delivering on that. He will know that living standards are forecast to grow over four times faster than in the previous Parliament, and real wages have already grown by more in the first 10 months of this Government than in the first 10 years of the previous Conservative Government. He will know that, in answer to the question opposite, GDP per capita is forecast to rise by 5.6% over this Parliament. Under the last Labour Government, productivity growth was the second fastest in the G7. Under the Tories, it fell to the second slowest in the G7.