They lost the argument, now they must pay the price of their profligacy

Windfall Tax: ROAD TO THE TAX

The privatised utilities can say what they like about the windfall tax and indeed they do, all of it unflattering, but the one thing they cannot argue is that they did not see it coming. Labour first hinted at the imposition of such a levy in its 1992 election manifesto. John Smith, the then Labour leader and Gordon Brown, the shadow chancellor, turned it into a firm commitment a year later.

Since then, the utilities have been on a war footing. They have squirmed and wriggled, they have complained and cajoled, they have whined and they have dined in an attempt to persuade opinion-formers what an arbitrary, retrospective and unfair tax it is. And finally they have threatened. Tax us and we will see you in court. But their every act has merely brought them, Oedipus-like, closer to their fate.

However hard the utilities have lobbied, Labour has always been one step ahead, impervious to their pleas and implacable in its determination to introduce the tax.

The intellectual basis for the tax is shaky. Labour sometimes refers to the special levy Sir Geoffrey Howe imposed on the high street banks in 1981 as a precedent for what it is doing now. The then chancellor imposed a one-off tax of 2.5 per cent on the banks' non-interest bearing sterling deposits. But there was a specific reason for it. In 1981 interest rates were high - a reflection of the Conservative government's monetary policy - but banks were prevented by law from paying interest on deposits held in current accounts with the result that they began accumulating super profits.

The tax had the merit of being well-defined, coherent and timely; it was levied when the windfall profits were being earned, not years later.

The windfall utilities tax can boast none of these things. But it has popular support, since the money it raises will be used to get the young unemployed into work. The utilities thought they could win the argument by depicting the levy as a tax on 12 million shareholders and 25 million consumers. Labour's landslide election victory put paid to that. The campaign against the tax was also undermined by a series of spectacular own-goals. First there were the "fat cat" headlines that greeted bumper annual pay rises culminating in the public humiliation of Cedric Brown at British Gas over his 75 per cent pay increase, and Sir Desmond Pitcher at United Utilities. The two men had a pig and a pantomime cat named after them respectively.

Then there were the huge share option windfalls directors of the National Grid and privatised electricity companies collected as they were floated on the market or scooped out of it during the frenzy of takeover bids in 1995 and 1996.

Finally, there was the apparently remorseless decline in standards that accompanied ever rising profits, most obviously in the water industry where the drought of 1995 reduced Yorkshire Water to the status of most hated company in the land as the standpipes sprang up and road tankers struggled to maintain supplies.

Now they are under attack for the lack of adequate investment in their infrastructure - whether it be Railtrack's failure to maintain the rail network or the water industry's failure to plug the leaks. Yesterday the privatised utilities, and their shareholders, discovered the cost of all that profligacy.

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search

Payday lender Cash Genie forced to repay £20m to ripped-off customers

The high-cost credit company preyed on vulnerable people struggling because of the recession

Mark Carney warns that the decision is likely to come into 'sharper relief' by 'the turn of the year'

An interest rate rise may be on the way - act now to secure a better mortgage deal

Competition has driven rates down but they could start drifting upwards

Santander 123 is attractive for those seeking interest on credit balances

Switching your current account? Pick one that reflects the way you run your finances

Andrew Hagger has carried out some research to try to establish which accounts are strongest in each of the different areas

A reader hit trouble after booking accommodation in a St Andrews hostel for the Open

Questions of Cash: 'Golfing break landed in the bunker when the price on the booking site was way below par'

One reader encountered a problem when booking accommodation at the St Andrews Tourist Hostel through HostelBookers

The Money Shop this week became the latest payday lender to have an ad banned

Payday lenders slammed for 'misleading' claims: charities say they're still not doing enough to help borrowers

Debt charities say there seems scant evidence to back up CFA's latest report

The crooks, like these in the 1955 film The Ladykillers, are waiting in the shadows as people cash in their savings

Savers are embracing their pension freedom ... and so are the scammers

There have been fresh warnings that scammers are trying to trick people into using liberated cash to invest in dodgy schemes

Don't get burnt: holidaymakers should check their plastic

How to avoid costly debit or credit card charges on overseas trips

Taking the wrong plastic can be a costly mistake, leaving you paying over the odds for your holiday spending money to the tune of £68, maybe more

From as far back as the Seventies, women have been drawn to the tables, attracted by the sense of feeling like a celebrity

Gambling is on the rise - so is enough being done to combat problem betting?

More and more of the 'AB' classes are joining the vulnerable in playing the odds, as Neasa MacErlean reports
No sunshine: Not all pensioners will be as happy as these women

Freedom reform leads to £1.8bn run on pension pots

But the right of over-55s to withdraw their retirement nest-eggs opens the door to scammers.

Mark Carney; '[there is] no immediate need to increase interest rates'

Interest rates: five things you need to know about a rise in rates by the end of the year

Mark Carney said the decision to raise interest rates was likely to come by 'the turn of the year'

Viagogo struck a discordant note when tickets for Ed Sheeran didn’t arrive

Viagogo withdraws tickets from sale the day before Ed Sheeran's concert, and the story repeats

Ticket frustration a go-go as gig-goers are let down again. Funny how bad publicity helps 

Just 39 per cent of 25-45 year-olds own a home in London, which has the lowest rates of young homeowners in the country (Getty)

Have you been given the wrong mortgage? City Watchdog says it is 'unclear' why two-fifths of loans were recommended

Stringent new rules were supposed to stamp out mortgage mis-selling, but only 59% of mortgage borrowers were given suitable advice

ATM access is to be investigated

The 'bank calls' suggesting to move the cash into the 'safe' account might steal your money

The alarm bells are ringing over 'no hang-up' fraud

Rip-off energy prices are here to stay, even though watchdog has slammed the Big Six

Big firms are skilled at increasing profits while millions struggle with fuel poverty

High costs on the high street: the largest players in British banking may not have enough incentive to be competitive

If a bank calls about transferring money because of fraud, you risk losing your life savings

A retired nurse lost £14,000 to unscrupulous rogues

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Financial Controller

    £45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Recruitment Genius: Sales Adviser - OTE £24,500

    £22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

    Recruitment Genius: Business Development Executive / Sales - OTE £40,000

    £18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

    Day In a Page

    Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

    Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

    Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
    Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

    Our choice is years of Tory rule under Corbyn or a return to a Labour government

    Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'
    Singapore's domestic workers routinely exploited and often abused in the service of rich nationals

    Singapore's hidden secret of domestic worker abuse

    David Cameron was shown the country's shiniest veneer on his tour. What he didn't see was the army of foreign women who are routinely exploited and often abused in the service of rich nationals
    Showdown by Shirley Jackson: A previously unpublished short story from the queen of American Gothic

    Showdown, by Shirley Jackson

    A previously unpublished short story from the queen of American Gothic
    10 best DSLRs

    Be sharp! 10 best DSLRs

    Up your photography game with a versatile, powerful machine
    Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

    Solved after 200 years

    The mysterious deaths of 3,000 soldiers from Napoleon's army
    Every regional power has betrayed the Kurds so Turkish bombing is no surprise

    Robert Fisk on the Turkey conflict

    Every regional power has betrayed the Kurds so Turkish bombing is no surprise
    Investigation into wreck of unidentified submarine found off the coast of Sweden

    Sunken sub

    Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
    Instagram and Facebook have 'totally changed' the way people buy clothes

    Age of the selfie

    Instagram and Facebook have 'totally changed' the way people buy clothes
    Not so square: How BBC's Bloomsbury saga is sexing up the period drama

    Not so square

    How Virginia Woolf saga is sexing up the BBC period drama
    Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

    Still carrying the torch

    The seven teenagers given our Olympic hopes
    The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

    The West likes to think that 'civilisation' will defeat Isis...

    ...but history suggests otherwise
    The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

    The bald truth

    How thinning hair made me a Wayne Rooney sympathiser
    Froome wins second Tour de France after triumphant ride into Paris with Team Sky

    Tour de France 2015

    Froome rides into Paris to win historic second Tour
    Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

    A new beginning for supersonic flight?

    Concorde's successors are in the works 15 years on from the Paris crash