Clarke calls on Labour to clarify windfall tax

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The Independent Online
The Chancellor, Kenneth Clarke, yesterday sought to exploit Labour disarray over the windfall utilities tax by calling on the party's leadership to spell out clearly which industries and companies would pay the levy.

Mr Clarke also urged the Commons Trade and Industry Select Committee to call on the shadow chancellor, Gordon Brown, to answer questions about how the tax would be structured and levied.

His challenge follows reports that Mr Brown and the Labour leader, Tony Blair, are split over how widely the tax should be applied.

Earlier this week, Mr Blair's press secretary, Alastair Campbell, said the tax would be levied on "privatised monopoly utilities". Ed Wallis, chairman of the electricity generator, PowerGen, subsequently told MPs on the committee that on this basis it would escape the tax since it was not a monopoly, holding less than 20 per cent of the generation market.

A spokeswoman for Mr Blair then said that the party had not changed its position, suggesting that it could also take into account market power, how the companies had been initially priced and whether they had been lightly regulated.

Labour has also been approached by the re-elected Clinton administration and told that the tax should not unfairly discriminate against the US utilities that have bought up British regional electricity companies in the past 18 months. Three RECs have so far been taken over by US companies at a cost of pounds 4.4bn and two more are in the firing line.

Mr Clarke described the levy as "a tax on jobs, bills and pensions", saying it would put prices up, put people out of jobs and hit shareholders.

"The Labour Party are getting deeper and deeper into the mire of their so-called windfall tax on the privatised utilities. Tony Blair or Gordon Brown should put out a clear statement saying which industries and which companies will pay this tax. They invented the tax and they should now describe it honestly and clearly," he said.

Estimates of how much the tax might raise vary from pounds 5bn to pounds 10bn. Much will hinge on how widely it is applied and whether the two biggest utilities - BT and British Gas - escape the net or are left with only modest windfall tax bills.