Utilities plan to counter windfall tax

Click to follow
The Independent Online
The privatised utilities are preparing to mount a concerted campaign against Labour's threatened windfall tax in the run-up to the election, depicting it as a tax on their 7 million shareholders.

The campaign is likely to be coordinated through the various trade associations representing the water, electricity and transport industries and will remind investors that they are voters as well.

Separately at least two privatised companies are considering legal challenges should Labour go ahead with the tax, which could raise pounds 5bn according to some estimates. National Power intends to ask its lawyers to examine whether a windfall tax would breach European law by discriminating against a select number of companies.

The airports operator BAA is also seeking legal advice as to what constitutes a utility and whether Labour can, be law, impose the tax on some privatised monopolies but not others.

A spokesman for National Power, the country's biggest electricity generator, pointed out that its 1.2 million small shareholders owned almost 30 per cent of the company. "The assumption is that the money is there to be taken and that only a few fat cats will suffer but that is not the case," he added.

According to an analysis last month by the investment bank Goldman Sachs the tax could raise pounds 5bn and hit a far bigger number of companies than previously thought. If the tax is weighted according to market capitalisation, then BT would come off worst with a tax bill of pounds 1.33bn.

But other utilities would also be badly hit. British Gas, already facing a pounds 650m cut in revenues imposed by the industry regulator Clare Spottiswoode, would be landed with a pounds 503m tax bill. BAA, which owns seven airports including Heathrow, Gatwick and Stansted, would pay pounds 297m and National Power pounds 369m.

The campaign by the utilities is also likely to highlight the potential impact of the windfall tax on their employees. Although most of the companies have cut their workforces sharply since privatisation they still employ vast numbers in a large number of marginal constituencies in the South- east and the Midlands.

The Goldman Sachs report, drawn up after consultations with Labour's Treasury team, suggests that the tax may be tailored to mete out the harshest treatment to those utilities that have done most for shareholders and least for customers.

This week National Power has paid out pounds 1.3bn in special dividends to shareholders but the company says that the payout results largely from the money it has raised through the forced divestment of power stations to the Hanson-owned Eastern Group.

Gordon Brown, the shadow Chancellor, has pledged that the windfall tax receipts will be used to fund an ambitious employment and training programme.

Comments