Cost of Living

Lord Sikka Excerpts

Thursday 3rd February 2022 Grand Committee

[Lord Sikka (Lab)]

My Lords, I thank the noble Lord, Lord Whitty, for this timely debate. It is a pleasure to follow the noble Baroness, Lady Bennett of Manor Castle.

People are facing a twin threat of rising prices and shrinking incomes. The announcement of the new energy cap comes on the day when, as some have mentioned, Shell has announced that its profits have risen from $4.8 billion to $19.3 billion. It is so awash with money that it is paying an extra $8.5 billion to its shareholders in the shape of a share buyback. In the last decade, oil and gas companies have paid £200 billion in dividends while the regulators have been twiddling their thumbs and doing absolutely nothing. Over the last decade, the big six energy companies have paid £23 billion in dividends, which is 82% of their pre-tax profits and six times the amount of money that they pay in corporation tax. The sad truth is that the UK, unlike Ireland, cannot even produce its own electricity—it has to import it. It does not even have enough storage facilities for gas; thanks to the Government, they have been run down. Our gas storage facilities are equivalent to only 2% of our annual demand compared to—

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

Ireland does not generate its own gas—it gets it from us.

[Lord Sikka (Lab)]

Other countries are better at handling it, if you like. Let us look at Norway. Norway collects about $21.35 for each barrel of oil extracted from the North Sea because it kept a large part of it under public control. The UK gets only 8% of that: $1.72 per barrel—those are the figures for 2019. Why? Because of this obsession with light-touch regulation and privatisation being good, while people are basically struggling. It is shameful that as a nation we are not even able to generate our own electricity—enough to meet our needs.

Today’s announcement by the Government does not really help that much: £693 or £700 extra. Perhaps the Minister will be able to tell us how much additional VAT will be generated as a result of this hike in the energy price and exactly where it will go. The Government should have listened to the Labour Party and its call for a 5% cut in VAT. The imposition of that 5% is highly regressive: the poorest suffer the most. The Chancellor said today that he did not really want to reduce it because that helps the rich. That is interesting: the Government have been handing all kinds of tax cuts to the rich and he never complained, but now he says that this would help the rich. Of course, the Government could claw back the equivalent amount from the rich by, for example, increasing the highest rate of income tax from 45% to 50%. That option is always available, but not exactly exercised.

The 2% electricity discount is also highly deceptive. It is not a discount at all. If I go to a supermarket and it is selling something on a discount, that does not mean that I have to repay that amount over the next five years, which is what people are being forced to do here. They will have to repay about £40 over the next five years. The £150 council tax rebate does nothing for the poor or those living in rented accommodation. It would also be helpful to know who is paying the cost of that. Will central Government be bearing the cost of that £150 discount, or will it lead to a further cut in local authority budgets as they are forced to bear this cost? Even if this £150 gift, as some people are calling it, is accepted by some, what happens to the other £350 of the cost of energy that people will have to bear?

The Government need to rethink their entire economic policy. They need to help the poorest. They have already cut universal credit by £1,040 from 4.4 million people. They are offering only a 3.1% increase in the state pension, while the CPI is likely to be double that rate. The increase in minimum wage is 6.6%, while RPI is already at 7.5%, so that does not really do anything. Winter fuel payments have not changed since 2011. The Government need to offer an immediate increase in the state pension of £500, double the winter fuel allowance and increase universal credit and the minimum wage at least in line with RPI to give people a cushion.

Although we have talked about energy prices, we have not said much about what is happening to retail prices. Just in the past six weeks, the price of 18 essential, staple items has gone up by more than 8%, and supermarkets, now owned by private equity, are basically lapping it up. Morrisons has increased its price of those 18 items by 15.3% in the past six weeks and Asda by 13.6%. Why are the Government letting private equity rip and increase the cost of living?