Labour attacks windfalls from privatisation

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The Independent Online
LORD YOUNG, chairman of Cable and Wireless, was yesterday named by Labour as one of five executives who stand to make more than pounds 1m from share options in privatised public utilities.

Gordon Brown, the shadow Chancellor, said it was a scandal that tax rules for the share option schemes were costing the taxpayer pounds 200m a year in lost revenues. He promised that the next Labour government would close the tax loopholes.

Labour's attack on windfall profits for a total of 128 chairmen and directors of privatised public utilities, including water and electricity companies, increased concern about the high rewards for some executives.

It came after a survey in the Independent yesterday showed directors' pay had risen by 15 per cent but returns to shareholders had dropped to 6 per cent. Mr Brown said: 'There are some directors of privatised utilities who get huge tax reliefs and could make pounds 1- pounds 2m simply by being at the right place at the right time.'

Lord Young, a former deputy chairman of the Conservative Party and ally of Baroness Thatcher, stands to make a potential pounds 1.8m from 967,266 share options, currently worth pounds 4.35 each which he has yet to exercise, from Cable and Wireless. The other 'millionaire' beneficiaries of the executive share option schemes, which they have yet to exercise, included three members of the board of Powergen: John Rennocks ( pounds 1m), Alf Roberts, chief executive ( pounds 1.1m), Ed Wallis ( pounds 1.7m); and John Baker of National Power ( pounds 1.2m).

Some directors of the privatised utilities have already taken large profits from share options. Labour's list included Bryan Townsend, chairman and chief executive of Midlands Electricity, pounds 933,000, and four directors who each stood to gain pounds 466,500; Robert Evans, chairman of British Gas, pounds 309,400; Bryan Weston, chairman of Manweb, pounds 632,000; and four heads of Severn Trent Water who may have gained a total of pounds 864,100 from options exercised during 1992-93.

'There is now widespread outrage among customers, shareholders and the majority of employees about the abuse of discretionary share option schemes to benefit a small number of already highly- paid executives,' Mr Brown said.

Option holders do not pay income tax on the grant of the option or any increase in the market value of the shares before the option is exercised. They are liable for capital gains tax, not income tax.

'It's up to a company whether it awards shares to its employees, but it is wrong that the Treasury should subsidise these people. We propose to end all tax reliefs for executive share options and treat them as income.'

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