Taxation (Energy and Vehicles) Bill

Lord Fuller Excerpts

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

[Lord Fuller (Con)]

My Lords, my contribution is in two parts. Briefly, it is about time that the mileage rates went up to 55p. It reflects the obvious truth that the cost of getting about has become more expensive. These real costs must be covered, so I welcome this measure, in so far as it goes, but observe that it would have been much better had the rates been indexed for future years so as to avoid these cliff-edge effects. I also welcome the support for our hard-working lorry drivers. I know from personal experience, when I used to run trucks myself, how hard it is to make a living from road transport. In fact, we paid £1 million of tax per year on 40 vehicles before paying a single penny in corporation tax. The taxman has the first pull on the road.

I turn to the electricity generator levy. This is just another line in taxes, fees, charges and levies that have taken the aggregate burden of taxation to new highs, and which press down on our economy and squeeze the dynamism from it. Labour thinks it is going to tax the generators, but, as we all know, these levies work through, and are borne by, the consumer, so the Bill is adding another layer to the cost of living.

Last week, the lights nearly went out. For the third time this summer, NESO broke the glass to plead for generators to supply more electricity—any electricity, at any price. NESO has never had to ask for a margin in the summer before. On Friday last week, the Times reported that Britain was “close to blackouts”, and that the scale of the crisis “was hidden”. Let us shine a light on that. The Times reported that staff at NESO allege that, for “multiple periods” on 23 June,

“the grid fell outside safe operating limits … At the time the grid was using all possible supplies of power to meet demand, meaning that if any of these had failed it would have triggered an automatic system shutdown causing power cuts across the country”.

There have been other cases since.

The Government’s impact assessment of the Bill says it is

“not expected to have any significant macroeconomic impacts”.

All the boxes where the fiscal assessments would normally be written are empty. GOV.UK tells us that the

“Exchequer Secretary to the Treasury, has read this … information and … given the available evidence”

concludes that

“it represents a reasonable view of the likely costs, benefits and impacts of the measure”.

As Britain sweltered, it turned out that 420 of our critical cool-chain food warehouses, which store half our nation’s food, could barely keep their contents cool enough. In Spain, when the lights went out, people on life-support machines died. Last week, if it were not for the kindness of strangers in France, the lights would have gone out. If we meet France in the World Cup in five days’ time, who knows what will happen? Is this the impact the Exchequer Secretary had in mind?

Labour has brought us a grid that is demonstrably more fragile, wholly less reliable and significantly more expensive. It has brought our manufacturing economy to its knees with the world’s highest electricity prices, and this measure will make them more expensive still. We might have expected a margin call in January, when short day lengths and low winds combined with high demand for heating can cause a shock. That is expected, planned for and avoided. However, we do not expect that in the summer, when we are told that solar panels will make us more energy secure.

This measure will have significant unintended consequences beyond jacking up prices. Quite simply, it will make the cost of generating electricity more expensive. That will harm the investment case for building new power stations, so we will become even more reliant on the kindness of strangers. The reason we have high prices is that supply is constrained. We have reduced the competitive tension in the market with an overfocus on renewables. The truth is that this measure will harm the generating fleet replacement of our power stations as they wear out. The hard truth is that, when the person in the NESO control room presses the button, we need energy generators to supply electricity. There is nothing wrong with having power stations ticking over that are available to leap into action when, if the price is high enough, the call to action is given. That is how the market works. In these moments, given a choice between having the lights go out or paying through the nose, we need to pay up and look big. However, when we are in that hole and need these people to jump to attention, increasing the levy from 45% to 55% is biting the hand that feeds us at the very moment we are in greatest peril.

This generator levy reduces the incentive for companies to participate in the break-glass market unless we accept that the wholesale price is driven higher still. I can hardly believe what I am about to say, because I agree with the noble Lord, Lord Sikka, that the way to fix the energy market is not to have even more levies. It needs reform, because crowd-pleasing price caps and rent caps such as this will never work. We need reform of the energy market to break the link with gas, but this is not the way to do it.

Disincentivising the replacement of our power stations is going to lead to something worse and wholly more sinister. There are special types of power station that must be spread throughout the grid for it to function properly. These power stations provide grid frequency stabilisation and ensure that power matches electricity supply with the right frequency, tightly controlled around 50 hertz. In fact, keeping within 1% of that 50 hertz figure is a legal obligation for NESO, otherwise we all get contagious blackouts and equipment damage, so these inertial power stations have special value, value that must be paid for and that is perversely bought within the scope of this measure.

We have a structural risk on our grid in that there are only two of these special power stations north of the River Humber. Both are scheduled for closure and none for replacement. With more levies, there are fewer incentives to build their replacements, so the Bill is laying the structural framework for the entirety of the electricity grid in our nation, which extends to Ireland, but especially in the north of England and Scotland, to fail, by disincentivising the replacement of the special power stations that maintain the frequency and protect our economy.

Perhaps the Minister should have a word with the Exchequer Secretary to the Treasury, in the few days he remains in post, to explain that there are, after all, plenty of consequences to the Bill. In the meantime, this is where Labour’s ignorant energy fundamentalism has brought us. It is not that the lights normally go out under Labour; it is that this Government are legislating to ensure that they do.