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Business News

Centrica in new profits row


Centrica, the owner of British Gas, has flown into a fresh storm of controversy after unveiling a 9 per cent surge in half-year operating profit to £1.58bn only months after hiking household bills.

British Gas raised its prices by an inflation-busting 6 per cent in November, then saw revenues leap as the long, cold winter forced Britons to turn up the heating. Yesterday Centrica's half-year results showed profits at British Gas alone rose 3 per cent to £356m in the six months, sparking condemnation from politicians and consumer groups.

Michael Fallon, the Energy minister, said: "They should certainly show restraint in future prices. There have been some big increases and they need to show restraint." Caroline Flint, Labour's energy spokeswoman, added: "When times are tough, energy companies should be helping their customers, not clobbering them with price rises."

Yet Sam Laidlaw, Centrica's chief executive, refused to freeze prices, instead hinting at a further rise in bills when he said: "There are some cost pressures in the business." He said environmental charges were partly to blame for higher household bills.

The government-imposed Energy Companies Obligation scheme, designed to help low-income families with heating bills and green insulation, added £112 to the average British Gas £1,188 dual-fuel bill last year. It is set to be £16 higher than that in 2013 after just the first half. "Most people don't understand yet that over £120 a year on their bill is going to environmental charges," Mr Laidlaw said.

Those fees are supposed to be offset by lower consumption as a result of the extra insulation and other initiatives, but this year's cold winter saw households use 13 per cent more gas and electricity in the first half.

Mr Laidlaw also tried to deflect criticism of Centrica's profits by discussing the Government's tax regime. While it pays 47 per cent tax, which saw its bill hit £690m in the first six months of this year, its rival Npower was dubbed "the new Starbucks" by MPs earlier this year after admitting it had not paid corporation tax for three years. German-owned Npower said it was "in no way tax avoidance", adding "we've been investing hundreds of millions to keep the UK's lights on".

But Mr Laidlaw said: "Our basic British Gas business pays full corporation tax. There's nothing clever about our tax arrangements. It's important for us to contribute and to pay our full share of tax."

Mr Laidlaw's comments follow a warning from an all-party group of peers that the corporate tax system "is not working and urgently needs reform". Lord MacGregor, chairman of the Lords committee, said: "There is a sense that corporation tax is voluntary for some multinationals that operate globally, while small UK-based businesses go by the book and have to pay."