Windfall tax threat to water companies

Only two of the ten privatised water companies have paid any corporation tax since they were privatised six years ago. The industry has virtually become a tax-free zone, Labour environment spokesman Frank Dobson said last night.

He said the Government had been careful to cushion the industry before privatisation with a number of different deals that had protected the companies from tax liability.

So far, he said, the industry had made profits of more than pounds 9,803m, paying dividends of pounds 3,186m, and only two companies - Northumbrian and South-West - had paid any corporation tax at all.

Between 1990 and last year, their total liability and the total tax bill paid by the whole industry amounted to just pounds 13m.

Five other companies - Anglian, North-West, Thames, Wessex and Yorkshire - had paid no tax, and three others - Severn Trent, Southern, and Welsh Water - had offset tax liabilities against the losses of their parent companies.

Mr Dobson said last night: "The water companies and their public relations merchants are busily trying to come up with all sorts of fancy excuses why they shouldn't have to pay Labour's windfall tax.

"They can bleat all they want. They can't escape the facts.

"Before they were privatised, they were given enormous tax concessions. One of the wheezes used was to treat public sector investment as if it had been made by the privatised utilities. That amounted to a massive pounds 7.7bn tax allowance - exceeding pounds 1bn apiece for Anglian, North-west, Severn Trent and Thames."

"There was also a debt write-off, which provided the industry with a further pounds 5bn, and something called the green dowry: cash to help them live up to the environmental standards of the European Union. That came to another pounds 1.5bn."

He said profits in the industry had almost doubled in six years. "Last year, the water companies made more profits than at any time since privatisation, while investing less than at any time since privatisation.

"The water companies are so swilling with profits that they are up to their necks in takeovers and talk of share buy-backs."

Mr Dobson said: "Most taxpayers will be outraged. The companies will not be allowed to worm their way out of paying their fair share through Labour's windfall tax to help provide jobs and training for the lost generation."

Maintaining the political heat on the issue, shadow Chancellor Gordon Brown told BBC Radio 4's The World This Weekend that there was no question of a retreat on the windfall tax.

"The utilities have got a case to answer about their failure to work in the public interest since they were privatised," he said. "If I were looking for resources that were not being properly used - excess profits that have gone to the utilities against the public interest - to fund a programme for unemployment so that we can start getting people back to work, then it is obvious that I should actually be looking at the utilities and that is the way that we will proceed."