Railtrack could face windfall tax

Click to follow
Labour yesterday refused to rule out an extension of its proposed windfall tax on privatised utilities to a raft of new companies including BAA, which runs Britain's major airports, Associated British Ports and Railtrack.

The Shadow Chancellor, Gordon Brown, has been given legal advice not to rule in or out the companies which will be subject to windfall tax.

The controversy follows the publication last week of a paper by the City investment bank Goldman Sachs, which argued: "We believe Labour might extend its scope to include 'all' the previously privatised utilities (adding BT, AB Ports, BAA, Railtrack)."

Labour's windfall tax had been the subject of recent speculation with some pundits predicting that, by the time Labour reaches office, target companies will have spent any excessive profits. But the document, compiled by two analysts, Paul Walton and Edmund Shing, argues: "We have talked to the Labour Treasury team about the details of this windfall levy. While it is hard to pin it down on details, we believe we can make an initial assessment of the options it might consider. "The most important news is that all the privatised utilities might be taxed - negative for companies not previously thought to be in the firing line (BT, British Gas, generators and some transport stocks) in addition to the electricity and water companies. Moreover, the charge is expected to be pounds 3-5bn."

Mr Brown's office said that following legal advice they could not comment on which companies may or may not be subject to the tax, which will fund the party's job creation programme for young people. Doing so at this stage might open a Labour Chancellor up to a legal challenge in the future, the Opposition fears.

A windfall tax could present a sizeable blow to some of the firms, particularly BAA which faces big cuts in its profits from airport shops when duty free sales within Europe are scrapped in 1999.

Much of the business sector is critical of Labour's plans but the Opposition argues that the precedent for such a levy was set by the Tories, who applied a similar tax to the banks in the 1980s.