Unions worried by windfall tax

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Unions yesterday warned Gordon Brown that his job-creating "windfall" tax on privatised utilities could put tens of thousands on the dole.

As the shadow Chancellor reaffirmed his intention to introduce the levy in a keynote address to the conference, union leaders urged him to think "long and hard" about its potential impact.

Mr Brown will have to take tough measures to prevent companies making employees redundant in order to pay the tax, employee representatives said.

Donald McGregor, a national official of the GMB general union, said: "It must be a tax on windfall profits, not a tax on jobs."

Mike Jeram, of the public service union Unison, said he understood why Labour was planning to introduce the tax: "I'm as revolted as anyone else about the excesses in the industry, but it will have to be thought through thoroughly."

Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, said there was a real danger that the tax could cost tens of thousands of jobs and that management would simply blame a Labour government for the redundancies.

The unions' fears echo similar warnings by ministers and senior utility managers, although the Labour movement is in broad agreement over the need for a tax. The Government is likely to use the union comments, however, as ammunition in its argument against the levy.

In a series of private meetings with Mr Brown, senior union officials have argued that revenue raised from the new tax should, in part at least, be paid back to companies specifically for training and re-training employees.

So far, however, Labour has insisted that it would use the additional money - between pounds 5bn and pounds 10bn by most estimates - for a five-year programme to reduce unemployment nationally and in particular to create 250,000 jobs for the under-25s. Party officials have indicated that the tax could extend beyond the water and electricity industries - the original targets of the plan - to other privatised companies such as BT and British Gas when it could be shown that excess profits were being made.

Mr Jackson said the privatised utilities had already suffered massive redundancies and the tax could make it worse.

The power supply industry had shed 40,000 jobs in six years, with National Power reducing its work force from 17,000 to 4,500, he said. Next week, British Energy, the privatised nuclear industry, is expected to announce 2,000 job losses in a workforce of 7,000.

The engineering union leader said that if current Labour plans went ahead, companies would continue to make special payments to their shareholders, but make cutbacks in jobs. A Labour government would introduce tough regulations to prevent that.

According to industry sources, PowerGen has sought a deal with Labour in order to avoid the tax. Management indicated to the party that there could be provision for more training in the industry as a quid pro quo.

Some regional electricity and water companies have indicated they have agreed exemptions with the party, but Labour has since denied such an arrangement.

Donald Macintyre, page 15