Brown to consult on utility windfall tax

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The Independent Online
Gordon Brown, the shadow Chancellor, is to discuss his plans for a windfall tax of up to pounds 3bn with the utility regulators after the disclosure of new estimates that the water companies alone will make profits of around pounds 2bn in the current year.

Mr Brown is expected to consult the regulators shortly to discuss how a one-off Utility Monopoly Levy - earmarked to pay for a crash employment and training programme - could be tied to consumer price cuts.

In a fresh attempt to embarrass the Government with proposals for a one- off windfall tax - resisted so far by Kenneth Clarke, the Chancellor - Mr Brown will today publish estimates that the 10 water companies will in 1995-96 make pounds 2.07bn in profits, bringing the total profit figure since privatisation to around pounds 10bn.

And although Mr Brown will today highlight the profits of the water companies and argue that they have produced a minimal yield of corporation tax since privatisation, Labour policy is also closely targeted at the regional electricity companies. A City report by Smith New Court earlier this year, being studied by Labour, suggests that water and the electricity companies could between them withstand up to pounds 10bn of windfall taxes between them and still remain financially viable.

Ministers remain extremely wary of the idea of a windfall tax, not least because of Mr Clarke's firm statement in December last year that such a move would penalise success, hamper investment and adversely affect prices.

But it is acknowledged by some Tories, who are privately warming to the idea as a means of reducing borrowing, that two windfall taxes in the 1980s, first on oil company profits after the Opec price surge, and on the banks, do afford a precedent.

Mr Blair again promoted the idea of a windfall tax yesterday in an interview with the BBC Money Programme in which he said Labour "won't increase people's taxes and won't increase spending". His remarks followed his hint in an interview with the Independent on Sunday that Labour could cut personal taxes even lower than Mr Clarke in the November budget. He said: "I don't think anyone sensible wants to raise the tax burden."

Refusing to commit himself to opposing any November tax cuts, Mr Blair said: "The last thing they [voters] want to hear is that a Labour government is going to come in and make them even higher."

On the Money Programme yesterday, Mr Blair also promised that Labour's inflation target would be at least as tough as that set by the Government. He said if Labour were in power it would set its own inflation target "when we see the economic circumstances we are inheriting".

nFresh unease on the Labour left will surface this week with the publication by Peter Hain, the MP for Neath, of a new book Ayes to the Left.

Mr Hain proposes increased borrowing or taxes on higher earners to fund pounds 6bn needed to create 1 million jobs.

Mr Hain says the debate is not between "modernisers" and "traditionalists" but between "social democrats who want to manage the free market more humanely and libertarian socialists who wish to change it".

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