BT would challenge windfall tax in court

British Telecom's relations with the new Government were thrown into turmoil yesterday after an unexpected intervention by Sir Iain Vallance, the chairman, who warned the company may challenge Labour's planned windfall tax through the courts.

In a declaration which surprised even fellow directors, Sir Iain also revealed he had voted Labour at the last election, adding he would not have done so had he believed BT would be included in the tax.

"I for one would not have voted Labour if it had been in the manifesto," he said as BT revealed annual profits of pounds 3.2bn, a 4.7 per cent increase on the year before. Government sources said they were astonished by the outburst, which showed "political naivety".

Asked to confirm how he had voted, Sir Iain said "Labour", adding that it was not the only occasion he had supported the party in an election. Robert Brace, BT finance director, said it was the first time he had heard Sir Iain reveal his political affiliations in public.

Sir Iain insisted BT had received no indication from the Treasury whether it would have to pay the tax. "We have had no discussions with the Government. It is a long step from being considered to being taxed."

However he made clear that BT would use the legal system to fight the policy, to be included in next month's budget, though it was too early to say whether this would be in the UK or through the European Court.

"No Labour spokesman or minister has referred to BT in the context of the windfall tax. There's been no statement before the election and therefore the Government was not mandated to tax BT.

"It would be the fiduciary duty of the BT board to challenge this in the courts and we would not hesitate to do so."

Sir Iain denied his attack was linked to other issues under discussion with the Government. BT has offered to connect schools to the information superhighway for free and was hoping for an early end to the ban on broadcasting entertainment down its phone lines. It also wanted the go-ahead to buy the 40 per cent of the Cellnet mobile phone network it does not already own.

Sir Iain insisted BT's relations with the Government would not be damaged by the intervention. "It would be peevish to take our ball away and we wouldn't do so," said Sir Iain. He said the issue was "a storm in a teacup".

Labour's most recent policy statement, before the poll, appeared to widen the tax base to include BT, airports operator BAA and Railtrack. Gordon Brown, now chancellor, said the tax would apply to "privatised companies that are licensed and regulated by statute".

BAA supported the attack last night, confirming it was taking legal advice on the tax. Des Wilson, BAA director, said: "Frankly the way we have been allowed to be included in the speculation about the tax is unfair and verges on irresponsibility." Estimates of BT's liability vary widely. Soon-to-be published research on the tax by the London Business School (LBS) has suggested BT could pay pounds 1.1bn, based on a pounds 5bn tax levied on shareholder returns in the three years after privatisation. Using the same timescale Goldman Sachs, the US investment bank, suggested the figure would be pounds 318m. Both groups agree that on other measures BT could pay nothing, because recent returns for investors have been disappointing.

Sir Iain repeated yesterday that BT was no longer a utility. "We're not a monopoly, we're not a utility. To line BT up with the monopoly utilities for punishment in my view would be quite perverse." Though the UK phone market has been open to full competition since 1991, BT has held onto most of its customer base. It still has 91 per cent of residential telephone lines. Last year its number of residential lines fell by 110,000 to 20.4 million, mainly due to competition from cable companies. Turnover from international calls fell by 16 per cent during the fourth quarter of last year to pounds 416m. However operating profits in the same period rose by 19.6 per cent to pounds 695m, reflecting lower redundancy costs.

Martin Siner, economist with LBS, said BT's defence was largely irrelevant. "The argument has no impact because in the past, when the windfall gains were made, BT wasn't exposed to the same level of competition."

British Gas, renamed BG, also declined to rule out a legal challenge as it announced a 23 per cent fall in current cost pre-tax profits in the three months to the end of March, to pounds 711m. "It's just speculation about what anybody would do. We need to see the legislation," said Philip Hampton, finance director.

ScottishPower yesterday sought to contrast its less public opposition to the tax, refusing to comment beyond insisting that any dialogue would be made directly with the Treasury.

The group announced a 38 per cent surge in annual profits to pounds 558.4m before tax. Ian Russell, ScottishPower's finance director, said the company was in talks with several non-utility businesses about expanding its domestic gas operations.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Sport
Two christmas trees ,Moonbeam (2L), Moonchester (2R) and Santa Claus outside the Etihad Stadium
footballAll the action from today's games
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
News
i100
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas