Ofgas opposes windfall tax on British Gas

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The Independent Online
Clare Spottiswoode, the gas industry regulator, yesterday signalled her clear opposition to attempts by Labour to impose its planned windfall utility tax on British Gas.

Responding to plans by Gordon Brown, the shadow chancellor, to levy a broad tax on "the excess profits of privatised utilities", Ms Spottiswoode doubted whether the principle behind the levy could be applied to British Gas. She explained: "If I was going to do my job properly then there won't be any excess profits. If there aren't going to be any excess profits then it would be difficult to justify a windfall tax."

She argued the price controls planned for the group's pipeline business, TransCo, which would cut about pounds 30 off average bills from April, were designed to eliminate any excess earnings. British Gas has taken its battle against the price regime to the Monopolies and Mergers Commission.

Ms Spottiswoode pointed out that current shareholders in the company were not necessarily the same ones who had made excess profits on the rise in the share price since privatisation. Last year small investors, or "Sids", saw British Gas's share price dive by a third, wiping out a large chunk of the excess gains, as the City took fright at the TransCo price proposals.

Her comments yesterday were the most outspoken yet by a regulator against the windfall tax and bring Ms Spottiswoode into an unlikely alliance with British Gas on the issue. However, they could damage her relations with Labour in the run-up to the election.

In a separate move she confirmed her intention to publish several British Gas documents to try to provoke the company into a court battle over the disclosure of internal information. She dismissed British Gas's argument that much of the data it submits to Ofgas, her department, could affect its share price if it was made public.

"It is time that we really tested the law.... A lot of the complaints British Gas has about confidentiality are bogus," Ms Spottiswoode said.

Ofgas also disclosed that independent gas supply companies operating in trials of domestic competition in the South of England had agreed to a new voluntary code of conduct after allegations of dubious sales tactics.

Ms Spottiswoode said all British Gas's rivals would be joining the Direct Selling Association, a body recognised by the Office of Fair Trading.

The Gas Consumers Council had wanted Ofgas to make the code legally enforceable using its licence conditions. Ms Spottiswoode said she would "seriously consider" such a move, but only if the selling problems were not sorted out.

Ofgas yesterday released its annual report showing complaints against British Gas had tripled last year to 9,287. Ms Spottiswoode said complaints had levelled off but were "far from over".