Eastern wants BT to pay 'half windfall tax'

Eastern, the largest of the 12 regional electricity companies, yesterday urged Gordon Brown, the Chancellor of the Exchequer, to impose the windfall tax in such a way that British Telecom was made liable for nearly half the total raised.

The company also hinted strongly in a submission to the Treasury that if BT and British Gas escaped the levy then Eastern would join in a legal challenge.

At a meeting with senior Treasury officials the company, led by chairman John Devaney, said that the fairest and most practical means of levying the tax would be on the shareholder gains made by the privatised utilities in the first year after privatisation. On that basis Eastern calculates that BT would be liable to pay for 47 per cent of the levy or just under pounds 2.5bn if the tax raises pounds 5bn. British Gas, meanwhile, would have to bear 15 per cent of the levy but the 12 RECs and the two Scottish electricity companies, Scottish Power and Scottish Hydro, would only have to pay 13 per cent of the total levy. The water companies would pay 15.5 per cent.

In a written submission to Mr Brown, Eastern said that calculating the tax over a longer period than one year would move it away from the concept of being a one-off windfall tax and penalise those companies which had made genuine efficiency gains while compensating those that had performed poorly.