No windfall tax details until Labour is in power

CBI in Harrogate: Gordon Brown unveils anti-inflation strategy as John Monks calls for partnership between employers and unions

Labour yesterday disclosed that it would not spell out details of its windfall tax on the privatised utilities until it was in power. But it went further than it has gone before in setting out its tough anti- inflationary strategy, indicating that it would aim at a target of under 2.5 per cent.

Gordon Brown, the shadow Chancellor, said Labour would take representations from all interested parties on the windfall levy and "announce the details of its implementation once, in government, we have consulted the regulators".

The comment, in an address to the Confederation of British Industry annual conference in Harrogate, surprised business leaders who had expected details of the tax to emerge by the time of Labour's manifesto.

However, CBI leaders took heart at Mr Brown's pledge on low and stable inflation and his commitment to keep it at or below the rate of rival economies such as Germany. Mr Brown said: "We will not be satisfied with simply talking as tough as the Tories. For, unlike the Government, we plan to deliver on our inflation target. We will want our inflation performance to match that of our competitors in Europe."

If that was achieved then "never again should interest rate decisions affecting the long term appear to be manipulated for short-term party political ends", he said. Aides said later that a target of 2.5 per cent or less was "sensible", pointing out that inflation was running at 2.9 per cent against the Government's target of 2.5 per cent and a European average of 2.4 per cent.

A CBI spokesman said it welcomed Labour's commitment to low and stable inflation. But the further delay in detailing which companies will face the tax, how it will be structured and how much it will raise fuelled speculation that Labour has run into legal difficulties over the controversial levy.

Mr Brown emphasised it would be "a one-off windfall levy from the excess profits of the privatised utilities". "I think people increasingly understand that the windfall levy is going to happen and that it is a measure which has a clear and identifiable purpose," he said.

His aides said that in principle all privatised utilities would be considered for inclusion in the tax but they could not give a definition of which companies would be vulnerable. Estimates of how much the tax might raise range from pounds 5bn to pounds 10bn but a great deal hinges on how the tax is framed.

Labour sources conceded that Alastair Campbell, press secretary to Labour leader Tony Blair, had "dropped a clanger" when he stated last week that the tax would apply to "privatised monopoly utilities". That enabled the electricity generator PowerGen to claim that it would escape the levy.

Michael Heseltine, deputy Prime Minister, stepped up pressure on Labour over the windfall tax, describing it as Danegeld. "And you know the moral of that story. Once you've paid the Danegeld you never get rid of the Dane."

Mr Heseltine claimed that the levy would mean lower investment, higher prices, or both. "It's a proposed levy on each of us. On 8 million shareholders. On every consumer of gas, water, electricity. On everyone with a telephone. On jobs, on pensions."