City & Business: An arrogant tax

The Government is in grave danger of bringing its windfall tax into disrepute. The rumblings of discontent grow louder and there is now a distinct possibility that a central plank of Labour's revenue raising plans will be undermined. If that happens they will have only themselves to blame. A tax which had sunk quietly into the City's subconscious has been reawakened and is being portrayed as a greedy and underhand attack on enterprise.

That is only possible because of the clumsy and overbearing way in which the tax is being handled. The stylish way in which the Labour Party secured the moral high ground and quelled opposition to the tax when it was first proposed in opposition is being squandered by the arrogance of power.

It is important for the Government to regain the initiative and it can only do this by adopting a more conciliatory and communicative approach to the tax. Last week's outburst from BT and BAA came more in sorrow than anger from companies which would prefer to work with the Government than against it. The electricity and water companies are also keen to get their new relationship with government off to a good start. The problem is that we still do not know either the scope or the size of the tax, and until we do any sensible discussion is impossible. Unfortunately ignorance is not bliss and company directors are obliged to make contingency plans if they are to fulfil their obligations to shareholders.

The Government is not helping its cause by an extraordinarily hurried and confused period of non-consultation. Technical submission, but not pleas for exclusion, have to be with the Treasury by the end of the month. If the windfall tax is to be introduced in a Budget 10 days later that does not leave much room for manoeuvre.

If the Government insists on acting in haste it may well have to repent at leisure. Much better to defer imposition of the windfall tax for a few months and allow the issue to be thoroughly thrashed out. That will demonstrate a commitment to consult business and will also lead, ultimately, to a more robust tax.