Taxation (Energy and Vehicles) Bill
House of Lords · Lords Chamber · 14 Jul 2026 · 12 speeches · Official Report
Second Reading (and remaining stages)
Moved by
That the Bill be now read a second time.
My Lords, it is a pleasure to open the Second Reading debate on the Taxation (Energy and Vehicles) Bill. The measures contained in the Bill will support businesses across the UK as they deal with the immediate economic costs associated with the ongoing conflict in the Middle East. We did not start this conflict and we did not join it, but it is impacting our economy, including by putting pressure on energy markets and disrupting supply chains. Despite these pressures, the latest economic data shows that the Government’s economic plan is working. Inflation last month held steady. Britain’s economy was the fastest growing in the G7 for the first quarter of this year. Borrowing is forecast to fall in every year of this Parliament and wages are continuing to rise. However, as the Chancellor has said repeatedly, we must continue to be responsive to a changing world and responsible in the national interest. That is why we have taken action to support businesses and families, including by reducing VAT on summer activities from 20% to 5% and extending the 5p fuel duty cut until the end of the year, saving the average motorist £120 since last year. We have committed more than £50 million to help those struggling with the cost of heating oil. To support hauliers and farmers, we have cut red diesel by more than one-third until the end of this year. To help reduce costs for energy-intensive firms, we have expanded the British industry competitiveness scheme to more than 10,000...
My Lords, this Bill is presented by the Government as a series of targeted measures designed to address a specific issue: the war in the Middle East. I thank the Minister for his full explanation. However, the truth is that what we are discussing is a series of sticking-plaster measures designed to curb some of the worst excesses of what can be described only as an economy seriously in trouble. The current Government-and, indeed, the one that is to come under the leadership of Andy Burnham-face a deeply serious situation. Last week, the Office for Budget Responsibility warned in its Fiscal Risks and Sustainability report that, without action, public debt is set to move on to an unsustainable upward path in the near future. A key finding is that early action to head off difficult fiscal outcomes is much less costly than late action. This is partly due to the sheer scale of our national debt. Last year the Government borrowed £129 billion, 80% of which was spent on debt interest in an increasingly jumpy bond market. The OBR estimates that an additional £28 billion a year will be needed to meet the Government’s critical pledge to spend 3.5% of GDP on defence. At the same time, spending on the state pension and on health is projected to rise sharply in the next few years -one of the reasons why I called for a cap on expenditure on pensions as a percentage of GDP in my independent review of the state pension age as long ago as 2022 and why I deplore the failure to hold a full...
My Lords, I fully support my noble friend Lady Neville-Rolfe in her general statement about what needs to be done and in her specific criticisms and support for measures in this Bill. It is right that the best way out of the financial hole the Government find themselves in again is by growth. That is a cross-party idea on which we all agree. Unfortunately, this Government have one main hope, which is that a closer relationship with the EU and taking more EU laws into our system will give them extra growth, whereas all the evidence of the past shows the opposite. Our growth rate halved when we were in the EEC compared with 20 years before we joined it, because of the damage that laws and extra taxes did to our economy after we signed up to first the customs union and then the complete single market. If we look at the leaks and possibilities around the reset, it is practically all cost and no benefit-it is Britain giving in and becoming a rule taker. The rules will be more restrictive on some of our industries that were beginning to benefit from not having to take on all the extra rules that the EU has been legislating. There will be a considerable financial bill with the extra costs of Erasmus, the administrative levies, maybe a solidarity levy and the loss of £6 billion of fish over a 12-year period. I am afraid the Government will not find growth there. We are today focusing on this set of three limited measures. Like my noble friend, I think two of them are modestly...
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...
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...
My Lords, we on these Benches broadly support this Bill. It contains three sensible if modest measures responding to the real pressures households and business face because of the ongoing conflict in the Middle East, and we will not oppose them. Our wish is for the Government to do more to protect the public and the economy from the impacts of this continuing conflict, and to see that these measures are monitored, reviewed and reported on. I note that the fragile ceasefire, which many had hoped would bring stability to the region, has now completely broken down again. We have now had three days of American attacks on Iran; Iran has struck numerous tankers in the strait; and Trump is now talking of imposing a toll on all ships exiting the strait. The cost of oil has shot up again overnight, so this conflict is far from over, and its consequences for the UK, in terms of energy prices, fuel costs and the cost of living, will continue to be felt for some considerable time. I seek reassurance from the Minister that today’s measures must not and will not be the limit of the Government’s ambitions. They are welcome but they are minor in scale. This Bill does little to bring down the underlying cost of energy, particularly electricity, which remains stubbornly and unreasonably high. In brief, the Bill’s three measures are an increase in the electricity generator levy from 45% to 55%, targeted at exceptional returns when wholesale prices spike; an increase in the approved mileage...
My Lords, I thank all noble Lords who have spoken in this debate and the Minister for his usual courtesy in hosting it and for his explanation of the rather undefined windfall tax that my noble friend talked about. In particular, I note the lively contributions of my noble friend Lord Fuller and the noble Lord, Lord Sikka, who both touched on the fraught areas of contracts for difference and high wind-perhaps the Minister could comment on that. As we have discussed, the Bill contains some small and mainly useful welcome measures. The Government’s recognition that more must be done to support small businesses is also a step in the right direction. However, the difficulty we see is that, while such measures may have a place as emergency, short-term relief, as the previous Government recognised, they cannot form the basis of a sustainable, long-term economic strategy. More widely, noble Lords will be aware that the interim report of the Timms review of disability benefits spending was published last week, and it showed that spending is forecast by the Department for Work and Pensions to rise to more than £41 billion by 2031 on that benefit alone. As my noble friend and other noble Lords have made clear, the Office for Budget Responsibility has warned that taxes will have to rise or spending will have to be cut if we are to avoid an unsustainable path for debt. The tax rises that this Government have already imposed are themselves becoming unsustainable: they are penalising...
My Lords, it is a pleasure to close this Second Reading debate on the Taxation (Energy and Vehicles) Bill. I am very grateful to the select group of noble Lords for their contributions and questions. The measures contained in the Bill will support businesses across the UK as they deal with the immediate economic costs associated with the ongoing conflict in the Middle East. We did not start this conflict and we did not join it, but it is impacting our economy, including by putting pressure on energy markets and disrupting supply chains. That is why, as the Chancellor has said repeatedly, we must continue to be responsive to a changing world and responsible in the national interest. The noble Baroness, Lady Neville-Rolfe, once again unfortunately sought to talk down Britain’s economy, yet the latest economic data shows that inflation in the UK held steady while it rose in other comparable countries. The noble Baroness and the noble Lord, Lord Redwood, spoke about economic growth, but they did not mention that Britain’s economy was the fastest growing in the G7 for the first quarter of this year. The noble Baroness also spoke about debt borrowing being forecast to fall in every year of this Parliament. The measures contained in the Bill cover three areas: the electricity generator levy, mileage rates and the vehicle excise duty for heavy goods vehicles. The noble Baroness seemed keen to talk about almost anything other than the measures contained in the Bill, but when she did...
Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.