We're still guessing who'll pay the windfall tax

Gordon Brown has been at it again this week, talking about his windfall tax and who will pay it. Alas, the more he explains, the less clear it becomes. He injects clarity only to make things more opaque. Where there is certainty, he sows confusion.

Perhaps that is part of the strategy. Keep 'em guessing until the ink is dry on Labour's first Finance Bill. Perhaps it is because the Shadow Chancellor does not want to give any hostages to fortune. Perhaps it is because even now, three years after it first mooted the idea, Labour is still tied up in knots drafting a watertight legal definition of how the tax will be applied

Whatever the answer, Mr Brown was on his best and most elusive form as the election campaign proper kicked off. On Tuesday, he finally appeared to nail his colours to the mast at Labour's first election press briefing. He announced that the tax would affect privatised companies that are licensed and regulated by statute. That would seem to cast the net pretty wide.

Unfortunately, the Shadow Chancellor then went on to qualify his remarks. The tax, he added helpfully, would apply "only to those privatised utilities that were sold off at an under-valuation and have had lax regulatory regimes".

The problem, as the privatised companies themselves have discovered, is that every attempt to define more precisely who is in and who is out merely adds to the confusion. As the current Chancellor, Ken Clarke, observed, Mr Brown was playing "an absurd guessing game, giving journalists a clue and daring them to work out the answer".

Thus the Guardian confidently asserted that Mr Brown's latest definition would exempt both British Telecom and British Gas. This newspaper and the Financial Times asserted, on the other hand, that both were now directly in the firing line, along with the Recs and the water companies. The one area of general agreement appears to be that Associated British Ports is off the hook. Nice to know if you are ABP but not much help to anyone else, considering that enough energy has been expended on the subject to power a small town.

It is worth unpicking Mr Brown's words one by one, because in the space of a single simple phrase he can pack enough ambiguity to keep a lawyer in fees for a lifetime. We can agree on what constitutes a privatised company. But what is a utility? Water, gas and electricity yes. But what about telephones, airports and railway tracks? BAA has a monopoly on airports in the South-east and is price-regulated by statute, but it will dispatch a 3,000 word document setting the record straight if you dare suggest it is also a utility.

BT and British Gas may exhibit many of the characteristics of monopolies. But in certain parts of their business, they face intense competition, in others, stringent regulation. BG says Clare Spottiswoode's latest price controls would rob it off pounds 850m - more than its annual profits - and force it to make half the workforce redundant. On the face of it that does not sound like lax regulation.

The question of who qualifies is, then, tricky enough. Deciding how much they should pay is even more arbitrary. Mr Brown says it will be restricted to those utilities that were "under-valued" at flotation. But he also says it will only apply to that element of profits which are "excess". Most companies fall into the former category but not all fit the latter. If excess profits are measured by the extent to which total shareholder returns in these companies have outstripped the market average, then BT and BG will not pay a penny.

If the tax is based on straight market capitalisation, they will be the two most heavily penalised companies. However, research published recently by Simon Flowers, utilities analyst at NatWest Markets, suggests that even using the market capitalisation approach can produce wildly varying results. In three of the five scenarios he examines, BT pays nothing.

Interestingly, however, all of them assume that the two generators, National Power and PowerGen, are clobbered even though they are not monopolies, are not price-regulated and, on some definitions, are not even utilities.

The one certainty is that Labour will levy the tax - how else will it raise the pounds 3bn needed for its employment programme? And the safest bet is to assume it will be spread as widely as possible to cushion the impact on individual companies.

Beyond that, the conjecture is as idle as guessing at the scale of Labour's victory on 1 May. Tony Blair will work with whatever majority he gets. The utilities will have to live with whatever tax he levies, however unfair and arbitrary.

Could Toyota and the French get on?

What do you get when you cross Europe's most chauvinistic nation with Japan's most conservative car company? Answer: a pounds 1bn Toyota factory in Lens, northern France. If you find all this just a touch unbelievable, then you are not alone.

The only thing the French and the Japanese car industry have in common is their animosity. It is not so long ago that the chairman of Peugeot, Jaques Calvet, described Britain as a Japanese aircraft carrier floating off the coast of Europe, a reference to the fact that we had become home to its three biggest car-makers. For good measure he also referred to the UK as the fifth island of Japan.

Strong words, but scarcely surprising from a nation which insisted that all Japanese video recorders came in through the obscure inland port of Poitiers and all Nissans from Sunderland were Japanese.

It is just conceivable that the French have learnt their lesson. While the arrival of Japanese manufacturing techniques has helped revolutionise the British motor industry, France has slipped down the league, as Renault's current difficulties demonstrate.

But has Toyota been persuaded to switch its investment strategy so fundamentally? It looked long and hard at Britain before deciding to invest pounds 1bn at its Burnaston car plant. For that it got a site which, in configuration, mirrors its plant in Kentucky where Toyota turns out 400,000 cars a year.

Even at 200,000 cars a year, Burnaston will only just be an economic proposition. Why spend another pounds 1bn and employ an extra 3,000 to build a similar-sized plant on the other side of the Channel? More to the point, why pay French wage rates and social costs when Britain is so much cheaper?

The Japanese may not like our coolness towards a single currency but there are plenty of other compensations, starting with the language and the golf courses. Burnaston should not throw in the towel just yet.

Premier League Live
footballLIVE Follow all the Premier League action as it happens
Life and Style
3D printed bump keys can access almost any lock
gadgets + echSoftware needs photo of lock and not much more
The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
James Argent from Towie is missing, police say
peopleTV star had been reported missing
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
i100(and it's got nothing to do with the Great British Bake Off)
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
ebooksAn evocation of the conflict through the eyes of those who lived through it
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Mario Balotelli pictured in his Liverpool shirt for the first time
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Financial Technical Consultant (C++, C#, Finance, MSc, PhD)

£50000 per annum: Harrington Starr: Financial Technical Consultant (C++, C#, F...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone