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.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
i100
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
(L-R) Amanda Peet as Tina Morris, Melanie Lynskey as Michelle Pierson, Abby Ryder Fortson as Sophie Pierson, Mark Duplass as Brett Pierson and Steve Zissis as Alex Pappas in Togetherness
TV First US networks like HBO shook up drama - now it's comedy's turn
Travel
Pool with a view: the mMarina Bay Sands in Singapore
travel From Haiti and Alaska to Namibia and Iceland
News
The will of Helen Beatrix Heelis, better known as Beatrix Potter, was among those to be archived
people
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
News
Nigel Farage: 'I don't know anybody in politics as poor as we are'
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect