Power group hopes for windfall tax reprieve

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National Grid, the electricity supply group, is hopeful that after talks with Labour politicians, it will be among those excluded from the party's windfall tax aimed at hitting the profits of the privatised utilities.

Peter Gavin, National Grid's corporate affairs director, said yesterday, they had put a "powerful case" to Labour to be exempt from the tax.

He was speaking the day after The Independent revealed that Labour was having to revise its windfall tax plans after talks between senior figures in the party and several major utility companies, including British Gas.

The report provoked a furious political row with the Government saying it proved what they always thought, that the tax, intended to raise pounds 3bn, would not work.

Kenneth Clarke, the Chancellor of the Exchequer, said: "We looked at the tax when it appeared in one of the newspapers and we rapidly discovered that it was a fraud and it wouldn't raise the money or if it did it would cause great injustice and create damage to consumers."

Mr Clarke added: "It won't raise pounds 3 billion unless you're going to do tremendous damage. It was sold as a painless tax - a way of taxing the companies that provide our gas, our electricity, our water and our telecommunications." The Chancellor continued: "The implication was nobody was going to pay except some fat cats mysteriously in the background."

National Grid said it had been forced to fund a pounds 50 rebate for every electricity consumer at its flotation last December. "We're highly geared as a result, and we don't warrant any windfall tax," said Mr Gavin. A spokesman for Gordon Brown, the Shadow Chancellor, said his boss had never met anyone from British Gas to talk about the windfall tax. However, the Independent never made such an allegation. Richard Giordano, the British Gas chairman, the Independent understands, has met a senior member of Mr Brown's team where the windfall tax and its impact on the compoany was raised.

In the manifesto document published today, said Mr Brown's spokesman, the party "will reaffirm the commitment for a windfall levy on the privatised utilities."

The document will say: "to pay for these proposals we will have a one- off windfall levy on the excess profits of the privatised utilities which will pay for our carefully costed deal for young people and unemployed."

Labour accused lobbying firms of whipping up a case that their clients should be excluded from the tax. "The privatised utilities have made pounds 50bn profit in the last ten years," said Mr Brown. "They are now spending hundreds of thousands of pounds on lobbyists in a vain attempt to change Labour's mind."

The Shadow Chancellor said he had now instructed his colleagues "to tell these lobby firms that they are wasting their time and the privatised utilities are wasting their money."