CBI slates windfall proposal
Tax: CBI warns against setting `dangerous principle' as IoD lobbies for capital gains changes cuts
Wednesday 27 September 1995
A windfall tax arbitrarily interferes with contracts made when the utilities were sold, Mr Adair said in an interview with the Independent, putting a shot across the bows of both Tory and Labour advocates of a tax.
His attack came as Tim Melville-Ross, director-general of the Institute of Directors, also launched an attack on windfall taxes.
Mr Turner said: "If you sell a house to someone and three years later you regret the price at which you sold you have no right to say you should change the terms of the contract." He said such a move would set a "dangerous principle".
Mr Turner, whose comments were mainly directed at Labour's windfall tax proposals, refused to be drawn on whether he thought the Chancellor would introduce one to steal Labour's clothes, in"contravention of previously stated policies". In the case of the utilities, even accepting that a contract could be changed, the shareholders may not necessarily be those that got the windfall gain, because the shares had been sold on to others, he said.
Investors in utilities had always accepted that the regulatory regime was not fixed "forever and a day". BT's price controls had proved too slack and had been progressively tightened. Neither "investors, nor the CBI nor BT have said that is wrong. That is part of the regulatory process.
"Tempting though it is for somebody looking for a pot of money to override that, it is a well-understood structure. Regulation gives the Government a tool whereby over time it can make sure the profit of a monopoly provider is not excessive. It is those tools that should be used rather than a windfall tax."
Mr Turner rejected reports that he was either "soft on Labour" or alternatively had issued a warning to Labour about the negative impact of its policies. He said it was odd that these reports were based on the same remarks. "What Labour is saying now is fundamentally different from 1987 let alone 1983. There is a side of business which is very welcoming to that, because if one is getting to the stage where we can believe the difference between the parties has significantly narrowed that is good for business."
If Labour had changed in the same way as Labour parties in New Zealand and Australia had changed "that is damn good news for business", he added.
Business was still entitled to disagree with particular policies or seek clarifications on others. But some business people, while seeing the difference between the two parties had narrowed considerably, were still asking whether Labour would stick to it when in power. "It is a legitimate thing for business to say the apparent change is significant. But one of the open issues is whether they can really deliver."
Mr Turner welcomed Tony Blair's clarification at the weekend of Labour policy on the inflation target. "It is basically a continuation of existing policy. If that is true that is good news," he said. But the CBI disagrees with Labour's minimum wage and with its proposal to opt back into the European Social Chapter.
Mr Turner saw a new realism breaking out in Europe's discussions of monetary union over the last four days. He said this was thoroughly beneficial, in the sense that it was "obvious to anybody really thinking about it that monetary union is not going to occur in the fashion set down in the Maastricht Treaty by everybody simply going in at one point. To that extent the prime minister is absolutely right".
The CBI and the British Chambers of Commerce have commissioned Mori to conduct the biggest ever survey of business views on a single currency, polling 5,000 executives of large and small companies. It will be published on 6 November, just ahead of the CBI annual conference.
Mr Turner expressed concern at the slow pace of the Treasury's private finance initiative, especially in developing transport infrastructure.
The CBI is investigating the effectiveness of the initiative and is concerned that it is simply replacing existing public spending rather than adding to it.
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