View from City Road: A temptation to be resisted

ON RECENT performance the present government looks capable of contemplating almost anything in its attempts to keep restive backbenchers under control. So here's an idea for combining populist virtue with fiscal necessity.

As Treasury projections of government revenues melt away under the glare of an extended recession and falling inflation, causing the public sector borrowing requirement to rocket, what about a special tax on the burgeoning post-privatisation profits of the largely unloved utilities?

Outrageous? In the past, governments have not been so fastidious as to miss the chance of stinging oil companies and the clearing banks, equally ogre-like entities, for extra cash.

This was done under the provocation of 'windfall profits' stemming either from a soaring oil price or high interest rates in the days when banks had lots of 'free' current accounts to lend out.

To a cash-strapped Chancellor the utilities represent a tempting target. In their last financial years British Gas, BT, the electricity sector and the water companies made a combined pounds 9bn in pre-tax profits, amid uproar from consumers' representatives and the irrepressible Frank Dobson MP.

A 10 per cent tax would bring in a not insignificant sum. But there are multiple arguments against it. If profits in the utilities are indeed judged to be excessive, they can be dealt with by the regulators in pricing reviews rather than through arbitrary tax impositions.

And, after all, the Government still has 40 per cent of the English power generators' shares. Now would not be a good moment to undermine their potential value.