Windfall tax could fund new jobs creation in regions

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Labour's windfall tax on the privatised utilities could be used to fund the creation of jobs in the regions to defuse the Tory attack on Labour's "tax bombshell".

Under the plans being prepared by Labour, some of the tax on the excess profits of the water companies could be offered back to them for job creation in the regional water industries.

Senior Labour sources said earmarking the receipts from the tax for jobs and training in the regions could win wider support from the business community and answer Conservative attacks on the raid on excessive profits by water and electricity companies.

Gordon Brown, the shadow Chancellor, is committed to imposing the tax to pay for Labour's jobs and training programme. The tax would be paid to central government, but John Prescott, Labour's deputy leader, is keen to see some of the money harnessed to finance the drive for growth in the regions.

The water and electricity companies would be expected to take part in some of the job-creation schemes, which would be directed by regional development agencies.

Earlier this week, Labour claimed that the privatised companies pushed through a pounds 20m pay-and-perks package for their directors while becoming the worst group of persistent polluters in the country. The Labour survey, disclosed in the Independent on Sunday, showed that 12 executives in 10 larger water companies received packages in pay, bonuses, pension contributions and share options worth more than half a million pounds each.

The companies have been fighting Labour's plans for a windfall tax, but Labour believes some will see the advantage of paying a tax which comes back to them either directly in job-creation schemes or indirectly through benefits to their regions.

Mr Prescott is behind ambitious plans to take Labour's draft election manifesto on the road in dozens of meetings around the country. The tour, which will be joined by the party leader, Tony Blair, will seek to win support for the broad thrust of New Labour policy before the party conference in October.

Mr Prescott said: "I have been preparing a big push for the "Road to the Manifesto" campaign. Every constituency party is going to be involved, and trade unions. It is the biggest consultation exercise that has taken place."