| Previous Section | Index | Home Page |
Mr. Denis MacShane (Rotherham): May I report to the hon. Gentleman a conversation which I had nearly two years ago with, I think, the managing director of Yorkshire Electricity? The managing director said to me, "Please pass on the thanks of our finance director to Gordon Brown, because never has a tax been so flagged up and so much notice given to enable us to make appropriate arrangements." Hon. Members are expressing synthetic indignation about the mistaken idea that the tax is a surprise and that companies have not prepared for it, discounted it and accommodated themselves for it.
Mr. Bruce: I am grateful for that intervention, but it is beside the point. The tax may well have been well advertised and management may well have been able to make contingencies. Many of those fat cats may well have been delighted that there was hype about a tax that people thought would hit them, when in fact they were pocketing the money and salting it away in overseas accounts. On that basis, yes, they had plenty of notice to ensure that they did not pay a penny of what many people considered to be their ill-gotten gains.
The people who will ultimately pay are shareholders and consumers, because the regulator will take into account the arrangements that companies have made. People may not notice that they have had to pay the tax, but they will have paid it in the end.
The clause is open to interpretation, because it reads:
Therein, I suggest, lies an inherent contradiction in the Bill. No doubt the Minister will respond on that point at the end of this short debate. On the basis of the wording, it seems that it would be perfectly possible for a company to say, "We may have done very well in the first four years, but circumstances have changed beyond recognition and we are no longer benefiting, so we should not be liable to the tax."
On Second Reading, my hon. Friend the Member for Twickenham (Dr. Cable) made the pertinent point that several companies behaved in a fairly profligate manner soon after they were privatised. They sought to diversify out of their original functions and became involved in relatively expensive and not especially profitable ventures, on which they lost money. They could write such money off, and therefore not make windfall gains of the size that would otherwise have been made, so they will pay less substantial taxes than other companies that prudently concentrated on their core business and on building up their strength there. Companies that did not waste the money will pay more tax, which seems to be a penalty for prudence and well-directed strategy. In a sense, it rewards those who have taken more risks.
Some people may say that it is typical of a Liberal Democrat to comment that those are the opposite sides of the Labour and Conservative coins: the Tories privatise at a discount to give people a windfall, which the Labour party then taxes to put the money back into schemes that meet its set of priorities. It is money moving around the same group of organisations, but there are more open and honest ways to raise money and fund programmes. The methods of doing so should be sustainable and understood.
The assurance which we all need is that this will not be the beginning of a continuing process. The Government have argued that they did not invent the windfall tax idea
but that it was created by the Conservatives when they imposed a windfall tax on the banks. Two wrongs do not make a right, although it is arguable that the windfall tax on the banks was at least applied at the time the windfall was made, rather than a considerable time afterwards. However, the principle is just as wrong.
A range of privatised companies are now subjected to a windfall tax and continue to be subjected to regulation. The question then arises: at what point will it be determined that those companies are finally free of their history and able to operate in the marketplace, making their own commercial decisions within a realistic framework? Even at arm's length, regulation empowers the Government to influence those companies' policies substantially. I suspect that many of them will take the view that they would rather pay a windfall tax than have excessive regulation, which might interfere with the day-to-day management of their organisation.
It is interesting to note that the regulators' attitudes vary considerably. Regulation is a specific feature of the definition of a company liable to the windfall tax. I therefore distinguish between, for example, the electricity regulator and the gas regulator.
I remember an exchange that I had in the Trade and Industry Select Committee with Professor Littlechild--I am glad to say that his attitude changed a little afterwards--when he said that his job was to tell us what went wrong afterwards, not to interfere at the time, which was not why most of us thought he was appointed as regulator.
The current Director General of Gas Supply, on the other hand, said that she did not believe that it was the regulator's job to intervene to encourage gas companies to promote energy efficiency, despite all the agencies involved agreeing that it should be an effective part of the regulatory process. Because she has refused to intervene, that process has not happened.
I mention that to show that the impact of regulation on companies can differ substantially. As the Minister pointed out in interventions, regulation can modify abuses of both pricing and investment policy. There is potential for great argument about which company has been most affected by the impact of the regulator, and whether the assessment of the tax liability should be varied according to the degree of regulation and the conduct of the particular regulator.
I wonder whether the Government have given the companies any private assurances--if so, those should be made public--that, if they come quietly, there will be no further repercussions and in future there will be a reasonable climate for them to operate in. Management cannot be relaxed about the proposal unless assurances have been given that the tax will not be imposed again and that in future the companies will not be subjected to heavy-handed regulation, which could seriously affect their profitability.
Aspects of the tax are profoundly wrong in principle. It will ultimately fall on ordinary consumers, pensioners and shareholders to meet the cost, whether they are aware of it or not. The tax has implications for the continuing relationship between Government and the utilities. Some might argue that it could be a lever for a form of back-door nationalisation. It sets a precedent which would be extremely alarming if it were used by the Government to justify intervening in other sectors of the economy where they deemed that windfall earnings had accrued.
That is where the tax is most fundamentally wrong in principle. It is an irony that a new Labour Government have at the core of their manifesto commitment a very old Labour concept, which could set a bad precedent. I am grateful that Ministers have said that the tax is a one-off and will not be repeated. We will certainly hold them to that, because the precedent is wrong and should not be followed in future.
Mr. Campbell-Savours:
I had not intended to speak in the debate until about 10 minutes ago, when I noticed that there was a shortage of speakers. I intervene briefly to raise one or two points which, when I recollect what has happened over the years, may be significant.
I have never purchased--
Mr. Quentin Davies (Grantham and Stamford):
Will the hon. Gentleman give way?
Mr. Campbell-Savours:
No, I have not even started yet. Give me a chance.
I have never, at any stage of my life, purchased the stock of a privatised company, nor has any member of my immediate family. I have not done so--
Mr. Davies:
On a point of order, Sir Alan. I must intervene, or the Hansard record of our proceedings might be falsified. The hon. Member for Workington (Mr. Campbell-Savours) said that he was rising to speak only because he had noticed that there was a shortage of speakers. Those outside the Chamber would be justified in concluding from that that no other hon. Member had indicated to you that he or she wished to speak, or had tried to catch your eye. At my own count, five or six hon. Members on both sides rose on the last occasion when Members could have been called.
"Every company which, on 2nd July 1997, was benefitting from a windfall".
Who decides, and how, that a company is benefiting on 2 July 1997? In fact, the formula does not refer to 2 July 1997; it goes back to the first four years post-privatisation.
| Next Section
| Index | Home Page |