Windfall Tax

– in the House of Commons at 4:22 pm on 21st November 1996.

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Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister 4:22 pm, 21st November 1996

I beg to move, That this House deplores the dangers and injustices inherent in the concept of a windfall tax on the privatised utilities and condemns a tax that would hit consumers, shareholders and pensioners while damaging the credibility of the United Kingdom as a stable regime for inward investment.

It is now more than four years since the old Labour shadow Chancellor announced Labour's big idea of a windfall tax. Its very name implied that somehow money was there for the taking, that no one would feel the impact, and that fat cats would be punished appropriately. It implied that somehow Labour had found a pot of fool's gold with which to pay for its ever-lengthening list of unquantified spending commitments. It was a tax for the moment: a headline grabber; a soundbite tax.

Four years later, old Labour is gone and the old Labour shadow Chancellor has become the new Labour shadow Chancellor. However, the windfall relic has survived that cultural revolution—the windfall tax lives on.

Four years later, not even the most basic calculation or clarification has been advanced as to what the Labour party proposes. Every day, often in newspapers that are normally sympathetic to the Labour party, the chorus of condemnation grows. I quote from The Independent business section earlier this month: this is a tax hard to justify and hard to implement … Labour's tax lawyers and financial advisers are still, years after the proposal was mooted, wrestling with the legal difficulties of defining those the party wants to penalise. No Conservative Member could have put it more clearly.

Today, we are providing an opportunity for the Labour party to come clean, to answer the questions, to spell out the costs, and, above all, to let the British people know what the windfall tax will cost every one of them.

Photo of Mr Andrew Rowe Mr Andrew Rowe , Kent Mid

Does my right hon. Friend believe that the windfall tax is a pledge or a commitment, in the phraseology used so often by the shadow Chancellor?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

It is neither a pledge nor commitment; just a downright threat, I would have thought.

If one is to create the concept of a tax, people are entitled to ask who will have to pay; how much they will pay; where the lines will be drawn; how the victims will be defined; how the legal challenges will be avoided; how to stand up to the already audible cries of protest from international investors. It is interesting: in the most successful part of the rejuvenation of our economy in the constituencies of the Labour party are inward investors, who come to this country because it is the enterprise centre of Europe. Yet what do we hear? The moment attention is drawn to these people, the Labour party goes back to its old tricks of sneering at anything that smacks of an enterprise economy.

The Labour party is so subliminally ashamed of the concept that it has invented a tax that it is now trying to call it a levy—old taxes, new levies. It amounts to an unprecedented attack on our privatised industries. Is it an attack on all of them, or just some of them? If it is only some of them, which ones? If we are looking at only some of them, how will that be defined when drafting legislation? Which sectors of British industry have been singled out as the old-style milch cow for new-style Labour taxes?

The Labour party has yet to explain which companies it defines as utilities, let alone which utilities are covered. Indeed, we have it clearly on the record. At the Labour party conference, the Leader of the Opposition said that there would be a one-off windfall levy on the excess profits of the privatised monopoly utilities.

Photo of Mr Irvine Patnick Mr Irvine Patnick , Sheffield, Hallam

My right hon. Friend will have received a letter, as will the Leader of the Opposition, from Yorkshire Electricity, pointing out that, before privatisation, it paid £41 million in tax, and that it now pays £90 million in tax. It has pointed out that its prices have been reduced in real terms by 25 per cent. It has also pointed out the effect of a windfall tax on jobs, investment and prices.

Does my right hon. Friend agree, having read the letter, that, in the end, it is the people who use electricity who will pay; that it is the investors who look forward who will pay? In other words, the Labour party is penalising people for its own ends, and it knows not why.

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

My hon. Friend is absolutely right. I happen to have the letter to hand. It is interesting that the Labour party laughs at the effects that will flow to the constituents in Yorkshire, which are clearly set out in the letter from Yorkshire Electricity. What will the tax do? It will undermine our ability to sustain the current level of investment … affect jobs … increase prices to customers in the longer term … reduce dividend income for our shareholders, over 100,000 of whom live in our region and are also customers", and reduce pensioners' income as many of our large shareholders are pension funds.

That is what the windfall tax will do in Yorkshire, to the people who are expected to vote for the Labour party, which will introduce the tax, which will penalise the constituents on whose votes it depends.

Photo of Mr Donald Thompson Mr Donald Thompson , Calder Valley

When my right hon. Friend sees today's Yorkshire Post, he will see that the right hon. Member for Kingston upon Hull, East (Mr. Prescott), the deputy leader of the Labour party, sneered at journalists who were gathered in Yorkshire, and told them to talk to business men. Labour authorities were being accused of penalising pensioners in the same way as the windfall tax would penalise them. All that the right hon. Gentleman could say was, "Go and talk to the business men."

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

The right hon. Gentleman would be better advised to talk to pensioners and employees. [Interruption.] Yes, to the pensioners who own shares in the companies on which the Labour party intends to impose a windfall tax. Those are the people to whom he should talk.

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

It is nothing short of sheer hypocrisy for the Government, and the right hon. Gentleman in particular, to attack the Labour party on its proposals for a windfall tax on public utilities—for which Conservative Members act in a consultative capacity, and which give money to the Tory party for its election funds—when that same Government, of which the right hon. Gentleman was a member, some years ago decided to impose a windfall tax on the banks. What is the difference between a windfall tax on banks and a windfall tax on the fat cats who are close to Tory Members?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

Why does not the hon. Gentleman ask trade unions, which invested funds in the utilities? For taking the trouble to support the election of a Labour Government—if that were ever to happen—trade unions would have a windfall tax imposed on them.

The answer to the hon. Gentleman's question is simple: the tax on the banks in 1981 reflected the fact that large numbers of British depositors attracted no interest on their deposits. That enabled banks to make a one-off large capital gain, which was legitimate. That has nothing to do with the free market operation of selling shares in companies that were floated at a price that the market commanded-they are two totally different circumstances.

To understand the dilemma that faces anyone seriously trying to do business with the Labour party, let us take the dilemma of the chief executive of PowerGen, Mr. Ed Wallis. He made a simple mistake, because he took new Labour at its new face value. He was asked a straight question by a Select Committee of the House, and, being a straight guy, he gave a straight answer. He told the Select Committee that his company, PowerGen, not being a monopoly, would escape the tax. No one can blame him for saying that, because he had the full authority of no less a figure than Alastair Campbell to give him confidence.

In a letter written to The Independent on 5 November, Alastair Campbell confirmed that the tax would hit only monopolies. No sooner had Mr. Campbell offered that helpful confirmation than up popped someone else, rather more modestly referred to in The Daily Telegraph as merely a spokesperson for the shadow Chancellor. He set out the shadow Chancellor's view, which was totally different from the view that was previously believed and trusted in by Mr. Wallis. The spokesman said that, in principle, all privatised utilities will be considered, and that the Labour party will not want to discriminate unfairly.

I am sure that it will be a relief to all those who work in the privatised utilities to know that Labour is not aiming to discriminate unfairly. There will be no unfair discrimination: that is clear. In its place will be fair discrimination. What is fair discrimination, and when will the Leader of the Opposition and his shadow Chancellor reach agreement on a definition of who will pay the tax?

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

Does my right hon. Friend recall that the right hon. Member for Derby, South (Mrs. Beckett) was reported to have said on the wireless that she would be prepared to include in a windfall tax the British Airports Authority and British Airways? Does he think that that inclusion could be extended to successful, semi-monopoly companies such as British Aerospace, which he and I know well? What would be the implications for those three companies of this iniquitous windfall tax?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

My right hon. Friend asks an inevitable question. A refusal to define the tax base means that anyone who is interested in his or her tax liabilities will be unable to establish the risks of a Labour Government. It is, of course, precisely because the Labour party does not want anyone to be able to define the precise risks that its members will not answer the basic questions.

What this is really all about is a Labour attack on the successful privatised companies. What, in truth, do monopolies mean in a world in which competition is increasingly spreading all the time? Labour Members are incapable of answering that question.

I am talking not just about British Telecom, which patently faces world competition today, or about the domestic gas market, in which we have opened up competition and in which prices are adjusting downwards in those circumstances. There has been a massive reduction in electricity prices as a result of privatisation. Even in the water industry, we are now consulting about the possibility of greater competition. The fact is that, when Labour Members talk about monopolies, they completely fail to appreciate the revolution in competitive practice that is sweeping the country, and, indeed, the global market.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Will the Deputy Prime Minister confirm that, last year, Treasury officials considered recommending that the Government introduce a windfall tax, and that some Ministers were in favour of it, including Cabinet Ministers? Is that not the truth?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

We have never proposed to introduce a windfall tax related in any way to the Labour party's proposals. There is not a shred of evidence that members of this Government have supported such a proposal, and the Labour party knows it.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Is it true that the Chairman of the 1922 Committee—a Conservative Committee—expressed support for a windfall tax? Can the Deputy Prime Minister stand at that Dispatch Box and absolutely deny that any member of the British Cabinet has expressed support for a windfall tax in the past two years? Let us have a denial from the Dispatch Box.

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

This is rich. We cannot get an answer from the Labour party about who will pay, how much they will pay or which companies will pay, and the hon. Gentleman thinks that he can divert attention from the bankruptcy of Labour's ideas by asking questions to which he knows the answers as well as I do. There are no proposals for a windfall tax in the Conservative party, there never have been, and as far as the present Government are concerned, there never will be. Let us be quite clear about that.

Business people, to their cost, have a tendency to take new Labour's words at face value. "Blind trust", I think, is the term for it. That is a very dangerous thing to do with new Labour. New Labour's policies are not about specific proposals; they are about winks, nods, sideways glances, hints and suggestions. They are about anything other than the facts and the details. The fact is that, the more questions are asked, the more the realisation grows—as my right hon. Friend the Member for South Ribble (Mr. Atkins) pointed out—that behind the windfall tax there is a bill: a real bill, for real people to pay.

The owners of our privatised companies today comprise millions of individuals who had the faith to buy those companies with their own savings in a free market. Ten million shareholders have pensions and insurance policies based on extensive investment in the utilities—British pensioners, whose pension values are now threatened by Labour's determination to tax them retrospectively, as an act of vicious political spite.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Treasury)

On a day when the Government are unable or unwilling to find time to debate the implications of European monetary union, the Government have time to attack Opposition policies and yesterday civil servants were involved in costing Opposition promises. Who has time to run the country?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

As we have the most successful economy in western Europe, it is pretty obvious that it is the Government who have the time to run the country.

Photo of Mr Bruce Grocott Mr Bruce Grocott , The Wrekin

On business confidence in political parties, will the Deputy Prime Minister join me in congratulating the directors of the Haymarket Group, who made the shrewd decision in 1994 to make no donation to the Conservative party?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

I have nothing to do with the management of the company, but it made up for that in 1995.

Photo of Mr Graham Riddick Mr Graham Riddick , Colne Valley

Is my right hon. Friend aware that, in that fascinating and candid letter from Mr. Chatwin, chief executive of Yorkshire Electricity Group, he says: that threat of a Windfall Tax is depressing our share price which makes us far more vulnerable to take-over". Does not Labour's stakeholder tax make it more likely that successful British companies will fall into foreign hands?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

It is a classic situation. The Labour party did everything in its power to undercut the value of nationalised industries at the time of their flotation. Every political smear was used to keep prices down. Now we have made a success of them, it is undermining their success in the marketplace. As my hon. Friend says, that means that, if there were to be a takeover bid, the acquisition price would be lower. The Labour party has played politics with vital British assets.

If we are to make this economy the most successful in Europe, as we want to, we must attract inward investment into Britain. I wonder whether the Labour party has thought through exactly what it is doing. What will happen when overseas companies, having acquired British companies, are threatened retrospectively with a tax? What does Labour think will happen in the rest of the world when British companies seek to develop there? Does it think that such a tax, retrospectively and arbitrarily imposed on overseas companies in Britain, would be quietly accepted by overseas Governments? Of course it would not. There would be retaliation and pressures. The Labour party lives in a naive world if it thinks that British interests would not be damaged by the tax that it is contemplating.

Photo of Mr James Spicer Mr James Spicer , West Dorset

Directly on the question not of inward investment into Britain, but of British investment overseas, my right hon. Friend will know better than most hon. Members the expertise that many of our privatised companies have built up. They go out, do the consultancy work and spearhead jobs for other British companies overseas. Does he think that those consultancies, which do not bring in a vast amount of money but help enormously in the export sector, will continue at the same scale if we go down this road?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

The windfall tax will have wide ramifications, because it will prejudice the good name of Britain as a home for inward investment. That will affect British companies' reputation, which is a priceless asset, in both manufacturing and service industries throughout the world. The Labour party cannot live with the fact that, having fought to prevent privatisation all through the 1980s and still today in the 1990s, there is not a country left in the world that subscribes to its attitudes to ownership of industry. We have utterly won the intellectual argument, and virtually every country is privatising its industries.

The Labour party cannot live with the success that we forced through the House, despite its opposition, to the immense benefit of Britain's public. It simply cannot contemplate the thought that a nationalised industry has, for example, reduced its prices, improved its service or expanded into overseas markets, but that is what has happened, to the immense benefit of our economy. What, therefore, does Labour want to do? It wants to punish the companies that made it possible.

Labour cannot live with the thought that British Telecom has reduced prices by around 40 per cent. in real terms since privatisation, that it has brought huge improvements to its customers and that it is now a major internationally competitive company. Labour cannot stand the thought that British Gas has penetrated markets in more than 20 countries, bringing enormous new opportunities and jobs for Britain, or that water companies are investing more than £3 billion a year since privatisation, improving water quality and the infrastructure. The figures before privatisation, under the last Labour Government, were roughly half of what is now being spent by the privatised companies, which plan to invest a further £24 billion between now and the year 2005.

I was in the House, as some of my right hon. and hon. Friends were, in the 1970s when the Labour party slaughtered the water industry's investment programmes. We are still suffering the consequences of the fact that, when the International Monetary Fund came here and took over the running of our economy, at the top of the list of the cuts were the nationalised water industries. Labour cannot forgive the fact that we have restored that investment and doubled it.

What it comes to is that the Labour party wants to punish success. That affects everyone with a telephone, a gas bill, an electricity bill and a water bill. This is not a levy on utilities, but a tax on everyone who lives in Britain.

One might reasonably ask, therefore: how much is Labour going to seek to raise by way of a windfall tax and how many years in a row does it intend to do it? The concept of a windfall tax was that it could be levied just once, in one year, but the one-year-alone policy has now conveniently disappeared from view. It was The Guardian today that explained it. It says that the shadow Chancellor twice pledged in his conference speech to abolish the 16-hour rule. We put the cost of that at £875 million—(Interruption.] Just like Labour Members now, the shadow Chancellor protested vigorously, but let me quote from The Guardian:Abolishing the 16-hour rule is part of Labour's plan to up-skill the workforce, and is likely to happen swiftly. The windfall tax is supposed to pay for it—but there is only one windfall, and a permanent increase in spending. Direct hit by the Government. That is not from a Tory newspaper. That is the basis of the mounting criticism that is being levied across the spectrum at Labour's windfall tax.

There is therefore a simple choice, and the Labour party should come clean. Either this is a total confidence trick, with the Labour party making on-going commitments that will not be funded by a one-off tax—and therefore the commitments will not be met—or this is not a one-off tax, because, once Labour has tasted blood, why should it not go on gnawing relentlessly away? Either way, we should be told. Is it a one-off windfall tax or will it be an annual levy to pay for Labour's commitments?

Of course the Labour party has not answered the questions and I have little expectation that it will try, but the House has been helped by Goldman Sachs International Ltd. It has told us what it thinks a windfall tax is going to amount to. It could be up to £5 billion, it says, although other people suggest higher figures. I expect that, somehow or other, in all those forays to the City, with a nod here and a wink there, those clever bankers have worked it out. That of course is extremely convenient for the Labour party, because it will not give the figures. If the Opposition won the election, however, they would then be able to say, "Of course everyone knew what our windfall tax would do. It was all there in the newspapers about the £5 billion. Didn't you read what the City commentators told us? We never issued a denial at the time, so it was obvious that we were going to raise those sums of money."

The Opposition have never answered any questions, but they will not deny the sums that people are bandying around. It is right that the Opposition should come clean on this matter. They should tell us what the facts are. If they do not, they cannot blame us for making our own assumptions and calculations.

Underlying the issue is the fundamental fallacy of the concept of a windfall tax. In Labour's dream world, the idea is that somehow one can pluck money out of the air, and somehow there is a pot of molten gold to be poured down into the national economy, all without any consequences. Nothing could be more typical of the naive and self-serving approach of the Labour party. Nothing could show more clearly that the windfall tax would be a new tax imposed on business by people who know nothing about business, but of course know a great deal about taxes.

Has the right hon. Member for Dunfermline, East (Mr. Brown) told people in all seriousness that the tax would not have any knock-on effects on businesses, shareholders, investment, jobs, inward investment and confidence? Is he telling us that one can take £5 billion from a limited number of companies with no consequences?

The fact is that windfall taxes, like any other, must come from somewhere—in this case from British companies. They would be forced to pay higher taxes, and they would have a limited number of means of dealing with that. One of them is to raise prices. That is in no way surprising to the shadow Chancellor, because he admitted as much recently, when he said that prices would not be allowed to rise. If those prices are not to be allowed to rise, how would he stop them? Would he give a direction to the regulators to make sure that those prices did not rise? Are we going to have a prices policy for the utilities controlled by politicians in Whitehall? Is that what will happen?

The shadow Chancellor has already said that he would be prepared to stop prices rising as a result of a windfall tax, but another alternative is open to those companies—to cut their investment programmes. That, of course, would have an effect on jobs, rising standards and the competitiveness of our companies. We would then be back exactly where we were in the 1970s when the Labour party was in power. As we know, whenever the Opposition are in power, unemployment rises, and we are faced with that prospect yet again. That, together with the inflationary record of the Labour party, is an old, familiar and depressing story.

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

Is my right hon. Friend aware that evidence given to the Select Committee on Trade and Industry this week suggests that London Electricity would cut its investment programme if it faced a windfall tax?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

I am extremely aware of exactly the dangers that my right hon. Friend has pointed out. The fact is that either prices would go up or investment would be cut as a result of the imposition of the windfall tax. There is no loose cash sitting about with no purpose in the pockets of British companies. A windfall tax would affect prices or jobs, or both. That is its only consequence.

I know perfectly well that it is the determination of the Labour party to give the impression that it is a painless tax, but to answer no questions about it. I am certainly not the first person to ask those questions. In July this year, the Leader of the Opposition was interviewed on "The Financial World Tonight" and he was asked, for example, whether British Telecom and British Gas would pay the new tax. He said: we are not going to start specifying particular sums of money from particular utilities. That did not get us very far, so the interviewer tried again: Is it all of the utilities that would come under a windfall tax? The Labour leader replied: Well, as I say, Gordon has said that we are not going to start specifying at this point in time that there are particular utilities who are going to pay particular sums of money or whatever". The interviewer was singularly unimpressed, and tried a third time, by asking: Why won't you give them that detail? "The right hon. Gentleman replied: Well, with all due respect, we are giving that detail. I mean, we have simply said that in relation to specific utility companies we're not going to say specifically how much money companies are going to pay …at this moment". That from the party which claims it is fit to govern the country. The Opposition have had four years to plan their policy and to show they know what they are talking about, and still there are no answers to the basic questions.

It is no surprise that concern about and criticism of the windfall tax has percolated through to the upper reaches of the Labour party. Alert as ever, the deputy leader of the Labour party has got wind of it first, so he has come up with a wheeze. We are told by the financial Times that he has held a series of meetings with the utilities executives to discuss their involvement in local job creation and regeneration projects, funded by the tax on their excess profits. One might say that that is a worthy vision.

Off the right hon. Gentleman goes to the shadow Chancellor to set out his proposals. He says, "Look, shadow Chancellor, we've got a bit of a dog's breakfast here, left over from the old heady days when you and I were still recovering from peddling the myth that Neil and Roy were the dream ticket. Well, we've all come a long way since that, and I suggest that we hypothecate"—I do not think that the right hon. Gentleman would have used that word—"and use some of the windfall revenue for worthy schemes."

The shadow Chancellor was, to put it bluntly, unamused. In fact, he took off into outer orbit. He has already spent the money about 35 times over, but there was his right hon. Friend threatening to give the whole bloomin' lot away before he even gets his hands on it.

We should at least give the deputy leader of the Labour party his due. He cannot answer any of the questions, but, my word, he can certainly spot a question coming his way when he has had four years to think about it.

I must tell the Opposition that they cannot go on running from the questions. They must set out the basic principles on which the tax would be based. Tell us which companies would be affected and what criteria would be used. Tell us how big the bill will be for pensioners, customers and shareholders. Is it £5 billion, £6 billion, £7 billion or £10 billion? But then, on second thoughts, why bother? There will not be a windfall tax under the next Government, because the next Government will be a Conservative one.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition 4:57 pm, 21st November 1996

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: notes the plight of unemployed young people and the long-term unemployed and welcomes the Labour Party's initiatives to deal with these problems, to be financed by a windfall levy on the excess profits of the privatised utilities.

The Deputy Prime Minister sought to prove that consumers, shareholders and pensioners will suffer from Labour's windfall levy. That is the Government's case. We did not hear one word from him about the excess profits that have been made by the privatised utilities. There is no doubt that they have made such profits; even the regulators have recognised that and taken action. I thought that the right hon. Gentleman's speech was rather tired. It contained an awful lot of tired questions and was not even helped by the humour in a couple of set questions with set answers.

The Deputy Prime Minister made much play of the question whether we are proposing a levy or a tax, and no doubt we will hear an awful lot more about that. Perhaps those words do not come easily to him.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

What is the difference between them?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

That question was first asked by the first Government to levy a windfall tax, a Tory Government. The then Chancellor of the Exchequer said: I should require the banks to make a special fiscal contribution."—[Official Report, 10 March 1981; Vol. 1000, c. 773.] What is the difference between a tax, a levy and a "special fiscal contribution"?

Photo of Mr David Shaw Mr David Shaw , Dover

Will the right hon. Gentleman give way?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

I shall give way, in time. I always give way to fools such as the hon. Gentleman.

There has been an awful lot of rhetoric. We want to direct the attention of the House and the country to the fact that excess profits have been made. Let us not argue about the terms. There have been excess profits, and we intend to recover them, to put our people back to work. That is the difference between us and the Tories, and that is the point that we want to make.

The hon. Member for Sheffield, Hallam (Sir I. Patnick) quoted a letter from Yorkshire Electricity. He did riot tell us about the letter from Yorkshire Water, but I shall leave that issue aside for now. The person at Yorkshire Electricity who wrote to the hon. Gentleman is one of the people who have benefited greatly from privatisation. Since privatisation, annual boardroom pay has increased by 565 per cent., and board members have £2.7 million in share options outstanding. I would write a letter to the hon. Gentleman if I thought that those privileges were under attack.

Photo of Mr Irvine Patnick Mr Irvine Patnick , Sheffield, Hallam

The right hon. Gentleman has a copy of that letter£unless he has not had time to read it.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

I have a copy of the letter. I want to deal with the arguments made by the Deputy Prime Minister about the effects of a windfall tax on consumer prices, investments and pensions—which is the Government's case—but I wanted, first, to make those remarks, to deal with the points made by the Deputy Prime Minister in his speech.

Despite the protestations of the Deputy Prime Minister, the privatised utilities were sold off cheaply, weakly regulated and allowed to make excess profits. Labour plans to raise a levy to help put the unemployed of Britain back to work, because we believe that that is social justice.

The British people have paid a high price for privatisation. As I said, the privatised utilities were sold off cheaply and regulated weakly. That was done deliberately, to allow the City to make a financial killing, which it did. Moreover, often the utilities were provided with financial sweeteners, such as the £14 billion of written-off debt and tax allowances that were given to the water companies alone. Water companies' profits have rocketed, water bills have increased by 83 per cent., boardroom pay has soared, and there have been record share options and other perks. The British public are picking up the bill for privatisation, and we think that that is wrong.

Photo of Mr Rod Richards Mr Rod Richards , Clwyd North West

The right hon. Gentleman has told us that the windfall levy would be used to put people back to work. Will he tell the House whether Labour's plan would also include capital projects?

Photo of Mr Rod Richards Mr Rod Richards , Clwyd North West

I asked whether the Labour party's plan would include capital projects. If so, perhaps the right hon. Gentleman will outline some of them for us.

Photo of Mr David Shaw Mr David Shaw , Dover

Will the right hon. Gentleman tell the 3 million small business owners in this country and the 2 million other employers what is the Labour party definition of "excess profit?" Under Labour's definition, how many extra pounds in tax will small business people have to pay?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

That is a proper question, and I shall deal with it at the appropriate time. The hon. Gentleman has told us his opinion on such matters, but I remind him that he led the campaign to stop taxation of share options. Should the Chancellor, in his Budget—he will not tell us anything about it today—introduce a capital gains tax, people with share options will enjoy an even greater windfall than they have so far. I do not know whether the hon. Member for Dover (Mr. Shaw) would support that.

Today, we have seen the Deputy Prime Minister weeping crocodile tears for taxpayers, pensioners and consumers. This Government profess to have concern for the taxpayer, but are they not the Government who imposed 22 new taxes on the taxpayer? They profess to have concern for the pensioner, but are they not the Government who broke the link between pensions and earnings to fund tax cuts for the better-off? They also profess to have concern for the consumer, but are they not the same Government who slapped value added tax on to domestic fuel consumers, and penalised consumers—especially many pensioners—who cannot afford the heating bills imposed by the Government?

The Deputy Prime Minister must know that that value added tax increased fuel bills by £3 billion in three years. Are they not the same Government, and the same Deputy Prime Minister, who imposed the fossil fuel levy, which further increased fuel bills by £6 billion in the past five years—with more increases to come? How dare they talk about the burden on the public.

We have heard a great deal from the Deputy Prime Minister about shareholders and pension funds, of which he knows a great deal because of his business background. Was he thinking about shareholders when he encouraged firms to delay paying debts, which is the main cause of bankruptcy for small firms in enterprise Britain?

I recall when the Deputy Prime Minister sat on the Treasury Bench as a Tory Transport Minister, in 1970, when I was first elected as a Member of Parliament. I recall the debate that we had on the Mersey docks and harbour board, and I am sure that he, too, remembers it well. We were dealing with a statutory trust, which had statutory trustees. All the pensioners who invested in the trust thought that they had Government bonds, which were as safe as the Government. The Deputy Prime Minister, who was then a Minister, belonged to a Government who slashed the price of those bonds and the value of that trust's assets by one third. That action affected pensioners, and I protested about it to a Government who were supposedly concerned about pensioners and shareholders, but who imposed that tax on those pensioners and that trust fund.

I shall give the Deputy Prime Minister another example. He has been a Member of Parliament for a long time, and I cannot simply sit here and listen to him tell us how much he feels for shareholders and pensioners. Does he remember the nationalisation of the shipbuilding industry, when he was an Opposition transport spokesman, protesting about our formula for compensation? No doubt he will remember that. He said that the Labour Government's terms for compensation to shareholders were unfair. Day after day, he protested about those terms in the House. But after he became the Minister with responsibility for dealing with compensation claims, he rejected that stand and endorsed Labour's settlement for shareholders. It was simple hypocrisy.

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

The very reason why we could not restore the legitimate rights of the shareholders was that there had been so many transfers of ownership after nationalisation and before we came to power. It is precisely the same story here. There is absolutely no justice in penalising people who have bought shares at today's value because of mythical accusations of what happened yesterday.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

It sounds like another broken promise to me. The Conservatives promised one thing in opposition, and they delivered something else when they were in government. But the right hon. Gentleman should not take my word on it; shortly after the event, the editorial in The Times—I do not think that it is a Labour newspaper—judged that their treatment leaves a stain on this government, as on its predecessors, and on the reputation of those ministers (Mr. King, Mr. Heseltine) who made so much political noise and so many implicit promises at the time but who, when they enjoyed power, found it expedient to do nothing. That was not the Labour party; it was the editorial in The Times.

Let us come more up to date—to Tuesday 7 March 1995. The right hon. Gentleman claims to be concerned about shareholders. What about the £4 billion wiped off the market value of electricity companies in one day because the regulator, appointed by the Government, got his sums wrong on the formula?

I was particularly surprised that the right hon. Gentleman dared to mention pension funds, when he belongs to a Government who spent most of their time raiding the pension funds of most of the industries that they privatised. Hon. Members do not have to take my word for that—the Government were condemned by the pensions ombudsman for it. He took the view that a £200 million surplus had been taken out of the National Bus Company pension fund. He arrived at the judgment that the removal of the surplus was a breach of trust. The Conservatives raided the pension funds, but they have the audacity to come here and talk about a windfall levy on pension funds.

A common thread runs through all those incidents—the Deputy Prime Minister was in the Government on each occasion, usually pretty close to the source of the crime, intervening before breakfast, intervening before dinner and intervening before tea. Never did he act in the interests of the consumer, the pensioner, the taxpayer or the public. That is hypocrisy.

Photo of Kenneth Clarke Kenneth Clarke The Chancellor of the Exchequer

May I take the deputy leader of the Labour party away from his memoirs and bring him back to the windfall tax? Can he explain why he is not able to say whether the tax will apply to British Telecom?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

It is very interesting for the Chancellor to break his purdah and come to the Dispatch Box to ask that. I have some questions for him. Will he abolish capital gains tax? Will he reduce income tax?

Hon. Members:


Photo of Kenneth Clarke Kenneth Clarke The Chancellor of the Exchequer

I shall answer all questions about my Budget next Tuesday. Will it take the right hon. Gentleman until next Tuesday to answer my question? Why is his party unable to say whether the tax will apply to British Telecom? He has had four years to think of that detail, as he describes it.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

I shall give the same answer. We shall give all the details in the first Budget of a Labour Government.

Let me say something else in response. All the Deputy Prime Minister's questions about to whom the levy will apply, what the levy will be and how we will do it are proper questions, no doubt about it, but when the bankers' levy or—what was it?—fiscal contribution was announced in the Budget, Conservative Members were whipped through the Lobbies without being told any of those details. They were told that the details would be in the legislation when it came before the House. The measure did not apply to every bank, as the Chancellor knows. People were asking which bodies would pay and which would not. The then Chancellor replied, "We will tell you when we bring the Bill to Committee."

The Prime Minister said today that he wanted answers to those questions. He was a junior Whip in 1981, driving Conservative Members through the Lobbies with no answers to those same questions. It is a bit much for the Chancellor to ask us that. I shall trade some secrets with him behind the Chair if he will tell me what he will do in his Budget. No doubt he will not tell us, but who knows?

Let us stay with the realities. The windfall levy is not an original idea, I confess. It is not even particularly a Labour idea. It is a Tory idea. They did it to the banks. In 1981, the Conservative Government applied a windfall tax on the clearing banks that had made excess profits. In his 1981 Budget speech, the then Chancellor Geoffrey Howe made his position clear: Indeed, bank profits in recent years have increased sharply, both absolutely and by contrast with the experiences of most other businesses …Certainly the contrast with the sharply reduced profits of industrial companies is, if anything, more striking. In present difficult circumstances, I cannot avoid the conclusion that I should require the banks to make a special fiscal contribution."—[0fficial Report, 10 March 1981; Vol. 1000, c. 772-73.] Just put the words "public utilities" in that quotation and the justification for the windfall levy has been made by the former Chancellor.

We have given four years' notice of the principle of the tax. The Conservatives gave no notice in their election manifesto. Unlike the Tories, we have given industry plenty of warning. Even the shareholders and the pension funds have known since 1992 of the possibility of the windfall tax and its implementation. They have no doubt taken it into account when judging their earnings.

Photo of Mr Rupert Allason Mr Rupert Allason , Torbay

Will the right hon. Gentleman give way?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

No. I give way only to full-time Members.

The shadow Chancellor has made our point clearly. I do not know where the chairman of the Conservative party—the other half of the double act with the Deputy Prime Minister—is today, but on Monday he produced a document to try to whip up fear about the windfall levy. It was based on the remarkable assumption that the whole cost of the levy would be passed on to the customers. That was his assumption for the effects on jobs and prices; in other words, he assumed that there were no excess profits in the privatised utilities. I know of nobody who has come to that conclusion, except the chairman of propaganda, the right hon. Member for Peterborough (Dr. Mawhinney), if I can say that about him—sorry.

There is a mass of evidence to show that excess profits exist—not that evidence and facts have ever made much impression on the chairman of the Tory party. The evidence is clear for all to see. The excess profits fuelled the fat cat salaries and share options to which we have referred. Directors of electricity companies have received £5.5 million a year—an 800 per cent. increase since privatisation. Payments to water company directors have gone up from £1.3 million to £6.4 million a year—a 500 per cent. increase. The Deputy Prime Minister would be happy for the Chancellor to abolish capital gains tax in the Budget. I do not know whether the Chancellor has told him if he will do it. They have probably had their Budget chats. If capital gains tax is abolished, those directors will pocket a £30 million tax windfall by cashing in on their share options. That is wrong and we intend to look at that windfall.

We have heard an awful lot about share prices.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

I want to address some of the economic points, which are legitimate issues.

Northumbrian Water was sold for £157 million; a month later, its share value was £207 million—up by 30 per cent. The electricity company Seeboard was sold for £246 million; it is now worth £1.2 billion. Case after case shows that taxpayers were short-changed—indeed, I believe that they were robbed.

Hon. Members may say that the large sums of money that have been made go into investment, but the regulator has expressed concern about under-investment in those industries. Hon. Members should read the regulators' reports. The regulators have agreed price rises on the basis of false investment forecasts from the companies. The gas regulator said that British Gas had underspent by one third on its capital expenditure allowance. In other words, the companies were allowed to charge customers for capital expenditure that never took place. The water regulator found that not only did the water companies fail to honour investment promises, but they were given massive tax relief to encourage them to do so. Capital expenditure by the gas, electricity and water industries has fallen by nearly one fifth in real terms since 1995. Those are statements of the industry.

What about the tax take from those companies? I hear an awful lot said about that. Compared to the normal rate of corporation tax paid by other industrial companies, the privatised utilities have underpaid on tax, despite massive and obscene profits. Some water companies paid no corporation tax at all, while others paid less than 7 per cent—those figures compare with the typical 30 per cent. paid by industrial companies. Altogether, the energy and water companies alone have gained a tax windfall in this way of £4 billion since privatisation. [HON. MEMBERS: "Old Labour."] Is it "old Labour" to point out that it is wrong that excessive profits are being paid for by our people in jobs, prosperity and prices?

The takeover frenzy for companies—with firms from America and France queuing up to spend £12 billion on the electricity distribution companies alone—belies the Government's claim in the motion about inward investment. The chief executive of the American company bidding for Northern Electric said that he had taken account of Labour's plans for a windfall tax. Apparently, it is still profitable to invest in this country—even for those responsible for inward investment, as they have taken the effect of a windfall tax into account. The Deputy Prime Minister should listen to an investor who has not been put off by the tax.

Photo of Mr Keith Mans Mr Keith Mans , Wyre

If the chief executive of the American firm has taken account of a windfall tax, does that not mean that he will be paying less for a national asset than he would without such a tax?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

The figures that I have given show that the firms are not paying a lot less, and they have certainly taken into account a windfall tax. The Deputy Prime Minister said that a windfall tax would deter inward investment, but apparently the Americans and French firms have taken into account what my right hon. Friend the shadow Chancellor has been saying for four years. There is every possibility that a Labour Government are around the corner, but those firms are still investing and buying into the utilities. They are putting their money where their mouth is, and we should listen to them.

There is plenty of evidence of excessive profits, but can the utilities still afford to pay the tax? I have heard quotations from various analysts—some of whom, including Goldman Sachs, have been mentioned by the Deputy Prime Minister. I refer him to the expert team from Warburg, a bank that has advised the Government on almost every one of their privatisations. Warburg has looked at the windfall tax and considered the various estimates, and makes it clear: The ability of most of the companies to cope with a Windfall Tax is once again demonstrated …a £5 billion overall levy is already broadly discounted. That is the judgment of Warburg, and Goldman Sachs has also made assumptions on the matter, but we will not make a judgment until my right hon. Friend the shadow Chancellor has talked to the regulator and the industry.

Some of the opinions quoted by the Deputy Prime Minister show that companies have discounted the windfall tax. They have not flooded out of the country and their shares have not collapsed. This is the key—a one-off specialised payment will not affect the long-term trend of shares, profits and investment. I am referring to the opinions of investment houses—including Warburg—to which the Government have paid millions for their advice on privatisation.

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

I have here Warburg's assessment of a windfall tax, and this is what it says: "unjust and arbitrary". It is right.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

Every tax is basically arbitrary. [Interruption.] That is a simple point, and I do not know why it is causing such consternation. As for "unjust", that is a judgment, and there are clearly differences between us about the justice of the tax. We will use those excessive profits to put people back to work—the Conservatives will put those profits in their own pockets. After a detailed study of pre-tax profits, debt, dividends and forecast share prices, Warburg concluded that the ability of most companies to cope with a windfall levy "is once again demonstrated".

I also call in aid the Institute of Directors, from which Labour receives little help or advice. However, an article in The Guardian quotes the IOD as saying: We acknowledge that some of the utilities do have spare cash at the moment, and that the economic impact of the tax might be insignificant". I presume that the Deputy Prime Minister is a member of the Institute of Directors—it is right up his street. Is he a member?

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

I have here a letter from the IOD with which I agree. The tax will be "hard to compute", is "not the best way" to raise revenue, and "customers will suffer". How many more bits of evidence do I have to produce? No one likes this tax.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

I do not doubt that a lot of people do not like tax. People in this country have every reason not to like tax as a result of the tax burden after 18 years of Conservative government.

The IOD acknowledged that there was spare cash in the utilities, but the Deputy Prime Minister said not a word about that in his speech. He did not say that the economic impact of the tax "might be insignificant", and his whole speech was about how significant and dire it was going to be for the utilities. It was a load of nonsense. The companies have the capacity to pay up without increasing prices or significantly affecting the long-term dividend and share values.

We plan to introduce a levy in the next Labour Government's first Budget. After that, we will receive representations from interested parties—by God, there are many in the Conservative party—and consult the regulators about the levy. First, it will be a one-off levy, and not an on-going tax like VAT on fuel. Secondly, the levy will be applied to privatised utilities that have gained excess profits. In principle, all privatised utilities will be considered as candidates for the levy without fear or favour. There will be no way out by lobbying or by avoidance schemes—or even by joining the team that the Deputy Prime Minister has reportedly set up. Thirdly, we will ensure that the levy is taken from excess profits, and not higher prices. That is what the regulators are there for, and they have made it clear that they will not allow the cost to be passed on to prices. Those regulators were appointed by the Government in previous legislation.

Fourthly, the proceeds will be put to a good use. What is, in our judgment, a "good use"? In 1981, the Government introduced a programme of fiscal contributions from banks. We have made it clear that the excess profits will be used to get people back to work. The Government took the view in 1981 that they were going to transfer the resources from the banks' excess profits into industry. I do not know where that money has gone and, at the moment, it does not matter. We are saying that we will direct those resources towards investment in our unemployed people.

The proceeds from the levy have been earmarked for two particular measures, and we promise that they will be put to no other purpose during the next Parliament. Our youth unemployment is almost double the level in Germany. Currently, some 265,000 young people have been unemployed for six months. Our pledge to every young person unemployed for more than six months is that we will offer him four options: a job with training, voluntary sector work with training, full-time study or the chance to join one of the environmental task forces. All those options have been spelt out in detail by the shadow Secretary of State for Education and Employment.

A quarter of a million young people will be offered new opportunities to gain jobs and skills and we will offer financial incentives to employers to take on the long-term unemployed. That is important for the whole country. The present situation, where one in five non-pensioner families have no wage earner in the household, cannot continue. It is a disgrace. We are seeing a two-nation Britain and a wasted generation of young people, and a Labour Government will set about the task of putting that right. It seems that some utility companies have taken to lobbying to seek exemption from the levy. I have a better proposition to make to them, since the Deputy Prime Minister referred to reports in the papers about what they could do. The Government and a future Labour Government will appeal to all companies and industry to help people to get back to work, and that proposal is often made at the Dispatch Box by Ministers. We will say to companies, "Think of ideas and help us to train our people. Provide the people with jobs and we will help you with organisation and financial incentives." That is at the core of our policy to get 250,000 people back to work.

From their constituency experience, many hon. Members will remember that the gas, electricity, water and railway industries all used to have very good training centres that contributed not only to training for those industries but to training provision in their areas. They trained more people than they required, but one of the first consequences of privatisation was that all the training bodies were scrapped—(Interruption.] I suggest that Tory Members go and look at the situation. What happened was that accountants became members of the board and pointed out that training was no longer a statutory requirement because the right hon. Member for Henley (Mr. Heseltine) and the Government had scrapped all the regulations and the utilities no longer had an obligation to train people.

It is time that those big companies thought seriously about how they can help to train our people, provide jobs and rebuild regional economies, but that is not tied to the levy. The levy will be paid directly to the Chancellor. The Labour Government will want to work in partnership with industry to see how we can provide good-quality training and not the skivvy training under the youth training scheme that the Government have provided.

Photo of Mr Michael Heseltine Mr Michael Heseltine First Secretary of State and Deputy Prime Minister

The right hon. Gentleman has made an interesting point. He will raise a one-off windfall tax in one year to pay the cost of employing 250,000 young people. What will happen in the second year?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

Perhaps it has not dawned on the Deputy Prime Minister that when people are taken off the dole—which costs £9,000 per person, according to the Government's figures—in the long term, more money is saved by reducing other public expenditure. [Interruption.] No Labour Government have had to live with 3 million unemployed. Unemployment was less than 1 million in 1979. It costs £20 billion to keep 3 million people on the dole, and I wish that we had heard a little more from Conservatives about how to get our people back to work so that we do not waste money keeping them on the dole.

We need to use our resources to get people back to work to meet the community's needs. That is the intelligent way to deal with the matter and my right hon. Friend the Member for Dunfermline, East (Mr. Brown) has constantly made the point about how much it costs to maintain people on the dole. In our proposals for incentives for the long-term unemployed, we have stated how much will be used for the financial incentive to keep people back at work. [Interruption.] I would have thought that the hon. Member for Dover, as an accountant, would know about the changes in losses and profits that will occur if people go back to work instead of staying on the dole. The hon. Gentleman will have his own concerns about being out of work, because our proposals will return the Labour candidate in Dover to replace him as the Member of Parliament. [Interruption.] The people are listening, even if Tory Members are not.

The chief executive of United Utilities, Brian Staples, quoted in the magazine "Utility Week", said that his company had better prospects under a Labour Government than under a Conservative Government. That is what he said and he is right.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

Will the right hon. Gentleman give way?

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

No. I have given way far more than the Deputy Prime Minister did.

The utilities would still have to pay the levy to the Treasury, but they could play a great part in local and regional regeneration to benefit our skills base and build our regional economies. In that way, they could play a key part in tackling the whole unemployment cycle.

Independent experts confirm that the levy can be raised from excess profits without passing on the cost to the customer. The windfall levy is fair, transparent and popular and we will put it to good use. The unemployed and the decent people in Britain cannot wait for us to give new hope to our young people and the long-term unemployed. It will not be long before we will get the chance to do it.

Photo of Miss Janet Fookes Miss Janet Fookes , Plymouth Drake

Before I call any Member to speak, I wish to point out that many Members want to speak and the debate must end at 7 o'clock. I therefore ask that Members make their speeches as short as possible.

Photo of Sir John Cope Sir John Cope , Northavon 5:34 pm, 21st November 1996

That was an irresponsible speech from the deputy leader of the Labour party, because it increased rather than decreased the uncertainty that surrounds the windfall tax. It shows that the Labour party is not fit or ready for the responsibility of government if it behaves like that with the taxation system.

I want to consider the precise terms of the amendment that the right hon. Gentleman moved. The amendment says that there would be a windfall levy on the excess profits of the privatised utilities. "Windfall" is a slightly odd word to use in the context as windfall apples are those which fall prematurely from the tree because of high winds. As a result, they do not count in the production of apples from that tree. Windfall apples are often bruised and worth less than other apples, except to the urchins who climb over the wall and pick them up. So referring to a windfall tax is an inappropriate use of the word.

Photo of Denis MacShane Denis MacShane , Rotherham

As an urchin, perhaps I may help the right hon. Gentleman by suggesting that the windfall levy could be called a fiscal contribution, which is the same language that his party used for the same tax a little over a decade ago. Would that help him out of his problem?

Photo of Sir John Cope Sir John Cope , Northavon

That is not the phrase used in the Labour party's amendment.

Photo of Ms Jean Corston Ms Jean Corston , Bristol East

Is the right hon. Gentleman aware of the legal definition of the word "windfall", which is something that accrues to a individual through no effort of his own?

Photo of Sir John Cope Sir John Cope , Northavon

I am always prepared to take legal advice from the hon. Lady as I know that she has legal training, but I am using the word in the ordinary way. A windfall benefits not the person who owns the tree, but the urchins who climb over the wall.

The more important definitions, rather than just the name of the tax, are those concerning "excess profits" and "privatised utilities". Those are the important words in the amendment and they are the nub of the debate. Those words summarise the questions that need to be answered and have not been answered after four years, as my right hon. Friend the Deputy Prime Minister pointed out earlier. The two main questions are how the tax will be calculated and which companies will pay it. Until we know that, we cannot work out what the effect will be on the companies, the consumers or anyone else.

On the question of how the tax will be calculated, the deputy leader of the Labour party said early in his speech that he would explain the definition of excess profits, but he never did. We have had profits taxes and excess profits taxes in the past.

Photo of Mr Norman Hogg Mr Norman Hogg , Cumbernauld and Kilsyth

Perhaps I can help the right hon. Gentleman, as I often did in the past when he was deputy Chief Whip. He will know that Scottish Power made a hostile bid for a water company in the south of England and has made equally hostile advances to Merseyside and North-Western electricity board. If Scottish Power is so rich that it can engage in such predatory activity, surely it has the money to pay the windfall tax.

Photo of Sir John Cope Sir John Cope , Northavon

I acknowledge the co-operation that the hon. Gentleman has shown in the past, but it is no good imposing a tax on a company because it has made a takeover bid. One has somehow to define excess profits so that the Government can say, "You will pay X per cent. of the profit that you have made."

Basically, there are two ways in which that might be done. The first would be to tax the operating profit. Sometimes the deputy Leader of the Opposition appeared to be looking towards the companies' operating profits, and spoke of their making excess profits in that sense. The other way would be to use the share values. The right hon. Gentleman spoke about the companies being sold off cheaply, and other parts of his speech suggested that the excess profits would be calculated on the basis of the way in which share prices had moved.

One thing is clear: whatever the definition is—whether it relates to operating profit or to share values at different points in time—the same definition must apply right across the companies on which the levy, tax or whatever one likes to call it, will fall. Apart from any other consideration, the Bill would be hybrid if that were not the case. A single definition must cover all the different companies to which the measure will apply.

We are not clear which companies will fall into the category, but if the right hon. Gentleman considers the possibilities, he will see that it is difficult to use a single definition in a fair way.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Did my right hon. Friend see the table published in the Financial Times on 31 October, which showed that if the levy were based on total return until 1 January 1993, British Telecom would have to pay £1,500 million, whereas if it were based on total return until 1 January 1996, it would have to pay nothing? Is it not extremely important that we should be told not only what is meant by excess profits, but the date from which the levy would be calculated?

Photo of Sir John Cope Sir John Cope , Northavon

Yes, because without that detail we do not know. The sums are arbitrary.

Photo of Stephen Timms Stephen Timms , Newham North East

Will the right hon. Gentleman give way?

Photo of Sir John Cope Sir John Cope , Northavon

I shall give way one last time, but I have already given way several times. Other people want to speak, too, and I must obey your instructions, Madam Deputy Speaker, by making my speech short.

Photo of Stephen Timms Stephen Timms , Newham North East

Was the right hon. Gentleman not a Whip on the Finance Bill when the measure was passed in 1981?

Photo of Sir John Cope Sir John Cope , Northavon

I have been all sorts of things, including a Treasury Minister. If the hon. Gentleman is talking about the banks levy, he will remember that the so-called windfall tax, if he likes to use that phrase—I have already expressed some doubts about it—came about not as a result of any operation by the banks but because there had been exceptionally high interest rates for a period. The tax was levied only on income from cash deposit accounts, and the measure was precise and well arranged.

I was asking whether the Opposition intended to impose the tax on operating profits or on share values. It is extremely difficult to find a definition of excess operating profits. What is an excess profit? There are regulators assessing all the companies and making judgments all over the place. Somehow or other they must come up with a legal definition of "excess".

If the Opposition intend to use operating profits, they might just as well increase corporation tax on all companies in a certain class. Indeed, the old profits tax which existed many years ago when I first started to study accountancy had some special rules for nationalised industries and utilities—although those concerned special reliefs rather than a special levy. I suggest that that would be a much simpler way.

At other times, however, the deputy Leader of the Labour party spoke as though the levy would fall on changes in the share values. As my right hon. Friend the Deputy Prime Minister pointed out, the difficulty with that idea is that the people who originally bought electricity shares in 1990, for example, are often no longer the shareholders.

In the case of SWEB, one of the companies which covers my area, none of the original shareholders is still there. The Southern Company, which bought SWEB, paid £9.65 each for the shares. The idea that shares are now worth more than that is difficult to measure, and may not be true. The other day when I asked the company, I was told that it would need to borrow money to pay the tax. That would hit its investment plans. Similar considerations apply in every case.

Although there was a rise in the share price of many of the companies after privatisation, that money is not within the companies, and never was. It rests with the shareholders, or rather with those who were shareholders at the time. Any levy imposed on the company itself will not get at the profit made by shareholders in the early stages. It never would have done, and never can do.

In almost all the companies, some existing shareholders show a loss on their investment. I looked at the share prices this morning, and different companies always have highs and lows. The high point for Anglian Water this year was 631p, but its shares stood at 567½p yesterday. Much the same could be said of the electricity companies. There are many shareholders whose shares show a loss at this point in time, although clearly they hope to show a profit in due course. The money never was in the companies, and certainly it is not there now, yet those people will be indirectly penalised. Those are some of the disadvantages of trying to raise the levy on the basis of changes in share values.

Another important set of questions has been asked, but not answered, today. On which companies will the levy fall? The right hon. Member for Kingston upon Hull, East (Mr. Prescott) largely followed the wording of the Opposition amendment, which says that the levy would be based on the excess profits of the privatised utilities". But the Leader of the Opposition said to the Confederation of British Industry that the target would be the privatised monopoly utilities. That is a different phrase, and covers a different set of companies.

Photo of Sir John Cope Sir John Cope , Northavon

Yes, far fewer. Certainly many companies are mentioned in that context which are in no way monopolies. British Gas, for example, may be included, yet in my part of the country there is competition with British Gas, to say nothing of British Telecom and the rest. BT has faced competition right from the start, with Mercury and so on, and now there is even greater competition. BT operates in the big world market. It is not a privatised monopoly utility at all, and neither is British Gas. The British Airports Authority is not one either. I am not even sure whether BAA is a utility. The word "utility" is not very precise.

Photo of Sir John Cope Sir John Cope , Northavon

I cannot see how one could say that that was a utility. It is certainly not a monopoly. The only word that fits is "privatised".

Photo of Sir John Cope Sir John Cope , Northavon

Of course—my hon. Friend is right.

As was pointed out in an earlier intervention, the right hon. Member for Derby, South (Mrs. Beckett) has said that the Labour party has not ruled out any of the privatised companies. Those include British Aerospace and Rolls-Royce, which employs some of my constituents, as well as some of the right hon. Lady's. I cannot see how on earth the definition could be extended to cover those companies. They are obviously not utilities. Using the definition in the amendment rather than that used by the right hon. Member for Derby, South, Rolls-Royce and British Aerospace escape—but so far as I can see, so do British Telecom, BAA, British Airways and the others.

What about Bristol Water, which supplies water to many of my constituents? It has never been nationalised; it has always been a private water company—and there are others. When it is loosely stated that there will be a tax on all utilities—that is what the right hon. Member for Kingston upon Hull, East said—we must think about Bristol Water. Are such companies entitled to rely on the wording of the amendment, which refers to "privatised utilities"? Does the deputy leader of the Labour party's emphasis at the end of his speech on "privatised utilities" mean that Bristol Water is out of it? I hope that we shall hear definitely whether such water companies are out of all this, as they should be. They do not come under any of the definitions that the deputy Leader of the Opposition gave. We need much greater clarity about the companies that will be involved, should the levy ever come about, or we shall not be able to tell what will be its effects.

There is no doubt that the main effect will fall on consumers, whatever the right hon. Member for Kingston upon Hull, East says. He said that it would not fall directly on consumers because Labour would not allow prices to be adjusted. That means that it will hit the companies' investment—and failure to invest ultimately hits consumers just as much as putting prices up.

Many companies are investing huge amounts. SWEB is investing £60 million this year to improve the distribution system, its service to customers, and so on. Yet City analysts, doing their best to find out what all this means, tell it that it might have to pay between £20 million and £80 million, the spectrum is that broad, to meet the levy. SWEB and Midland Electricity, which also serves my constituents, give excellent service—a better and cheaper service than when they were nationalised.

It is difficult to make out from what the right hon. Member for Kingston upon Hull, East said today or from previous statements by leading Labour spokesmen, some of which are contradictory, whether the leaders of the Labour party know the answers to my questions and will not tell us or whether they do not know the answers because they not worked them out yet. It must be one or the other; either way, it is damaging. The basic questions remain: which companies will pay? How will the tax be levied? What effect will it have?

The mere announcement of the tax four years ago, and the constant repetition of it since, has inhibited investment. Companies, shareholders, regulators and consumers do not know where they stand. Whatever the answers are, and however it is set out, the tax would be very damaging—so I am glad that it will not happen because there will not be a Labour Government.

Photo of Ken Purchase Ken Purchase , Wolverhampton North East 5:52 pm, 21st November 1996

The right hon. Member for Northavon (Sir J. Cope) spent an incredible time and no little energy in discussing, almost with himself, definitions. That is the least of the problems. The principle of the tax is established with Labour, as it was formerly with the Conservative Government in which he was a Minister, when the windfall tax on the banks went through. Is he saying that every i was dotted and every t crossed before the 1979 general election, when the Conservatives were planning to be a Government? Did they know exactly how, on whom, and when the windfall tax would operate? That is nonsense and is no more true than it is today.

Labour's Front-Bench spokesmen already have in their grasp almost precisely the definition for which the right hon. Member for Northavon is searching. Rightly and properly, they will wait to take the appropriate advice when it becomes necessary. Let me remind Conservative Members that they paid out an absolute fortune to find out how to privatise the former nationalised industries. That was because they did not know how to do it. They had to take advice. How much did they spend on denationalising Railtrack—was it £6 million, £7 million or £8 million? Whatever it was, they had to take appropriate advice. Surely they do not believe that it is beyond our wit to do the same by a due process of consultation with industry, commerce and the City and with those who would be affected by a windfall tax, to determine a definition that will stand up to rigorous scrutiny and on which we can depend to bring in this much needed cash.

Several hon. Members:


Photo of Ken Purchase Ken Purchase , Wolverhampton North East

I shall not give way. Time is too short and other hon. Members want to speak. I wish you to know that I will not be interrupted, Madam Deputy Speaker.

For Conservative Members to talk about the management of the economy is a disgrace. Was it not they who on black Wednesday blew £10 billion—we cannot be sure that we will ever know the proper total—on the hopeless cause of trying to defend the pound when the Chancellor of the Exchequer had already stated that he would pay any price to defend it? Was it not obvious that the City would take the bait and rip the Government apart? It was the Government who got into such a fix over the despicable poll tax that they had to add 2 per cent. to the general rate of VAT to recover their position. They have never been able to take it off.

I want to move directly to how the mess—and it is a mess, as I shall demonstrate—has come about. Regulation has troubled us since the beginning of the denationalisation programme. How do we regulate a monopoly? It is impossible to ape all the machinations and variations that typify a market in which there are any number of sellers and buyers. We do not always have that situation. In the case of what we call the pipes, the wires and the tracks, there is only one supplier. I will deal with TransCo in some detail later.

It is impossible, however bright the regulator may be, to create a market where none exists. That is the first lesson. We are discussing an inexact science. That has led to the difficulties that we daily have to deal with and is the basis of the assumptions that Labour's Front-Bench spokesmen make about the need to redress the wrongs that have been caused. It is a matter not only of taxation but of a new remit for the regulator and of a new approach to regulation that we will ultimately have to develop and implement in the interest of avoiding further excessive profits being made at the expense of the British taxpayer.

We must recognise that, however badly the regulators have regulated, personal squabbles aside—it has not been an enterprise covered in glory—the staff and resources of the regulators are too tiny compared to the resources available to the denationalised monopoly industries. Puny is how I would describe them. The regulators cannot cope. The Trade and Industry Select Committee's proceedings were mentioned earlier, so I feel at liberty to say that every witness to the Committee to date has said that the regulators' staff and resources do not and cannot match those available to British Gas or the electricity industry.

We are told that the Americans have mastered the art of regulation. If they have, where do American companies get the capital and revenue to buy up our utilities? It is because they have been making a bundle in the United States, despite the so-called tighter regulation there.

I have some Library figures that I got 12 months ago. They are not right up to date, but deal with the year 1994–95. I want hon. Members to know what the Library researchers were able to dig up from company annual reports. They found that, in that single year, the pre-tax profits of the denationalised utilities were £9.06 billion. Tax paid was £2.4 billion—27 per cent., instead of the full rate of corporation tax. Of course it is gross to net, we understand that, but that does not alter the fact that those figures represent an aggregate underpayment by the privatised utilities. We then find that dividends paid totalled £3.5 billion, which is 38.5 per cent. when expressed as a fraction of the £9 billion.

Those figures would be extraordinary by themselves, but we have to consider how they arose. The biggest contributor is the fact that, during the years of privatisation, no fewer than 146,776 people were sacked—dispensed with, finished—from those industries. That led to externalised costs for the rest of the community and the taxpayer of an average of £9,000 per person out of a job—for the utilities alone, every single one of the 21 million households in the United Kingdom bears a cost of around £63 per annum. How can the Conservative Government trumpet the great gains from privatisation when the truth is that it has been paid for in human misery and suffering and by every household in the United Kingdom?

The right hon. Member for Northavon asked about water companies and I shall give him some examples. I shall deal specifically not with his water company, but with the top three in terms of pre-tax profits. I start with Thames Water. That company's profits in 1994–95 were £303 million, but tax paid was 7 per cent. or £22 million.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

That was because of capital investment.

Photo of Ken Purchase Ken Purchase , Wolverhampton North East

It was not because of the company's capital investment.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

There is a very simple explanation as to why the water companies paid below average corporation tax: it is because of their high level of capital investment.

Photo of Ken Purchase Ken Purchase , Wolverhampton North East

That is only part of the answer, as the hon. Gentleman well knows. In a short speech, we cannot deal with these matters in the way that he wants and I will not get tied up by doing so. The headline figures are exceedingly important and give a proper flavour of the subject of this debate.

To return to my speech, the North West Water group's pre-tax profits were £284 million, but the company paid tax of just 5 per cent. Severn Trent's profits were £268 million, but only 11 per cent. was paid in tax. The area I represent is covered by Severn Trent and I have figures showing that, since privatisation, the company's profits have totalled £1.836 billion. Of course, there is overrewarding in the boardroom—directors' remuneration this year totals £1,249,000. Snouts in the trough would be a better description than overrewarding.

Competition has been mentioned, particularly in the south-west, which is the local area of the right hon. Member for Northavon. Competition has been introduced, but evidence to the Select Committee shows that the Gas Consumers Council has recorded a 90 per cent. increase in the number of complaints. That figure refers only to the unresolved complaints that have had to be dealt with by the council, not the whole range of complaints that have been made to the gas company.

How did we reach a position in which such enormous profits are made? One of the reasons was the terrible, tragic and crazy undervaluation of assets at the time of privatisation. In almost every instance—perhaps without exception—there was a significant undervaluation of the asset. Actually, one exception comes to mind—the nuclear industry. When it became perfectly clear that the industry could not be sold as a whole because money could not be made from it, the Government divided it up. They took the brand-new nuclear reactor—Sizewell B, which had cost £4 billion to construct and which had only recently been commissioned—and sold it for £2.9 billion. The rest of the nuclear liability was left in the public sector to be picked up by the taxpayer. That was a clear example of money being taken from the public purse to put in private pockets.

Finally, I want to address the question of TransCo, which is a natural monopoly because no one wants to dig into the ground to lay another set of gas pipes. The gas companies will all use the same gas pipes and the competition to which the right hon. Member for Northavon referred is between suppliers. What do the suppliers have to say about TransCo? To some extent, they agree with the regulator that prices are too high. When the regulator brought price capping into play, TransCo complained that 10,000 jobs would be lost. The truth was that it already had somewhere in the region of 9,000 job losses in the pipeline.

Then TransCo shares fell slightly in price and everyone's reaction was, "How terrible. The regulator is ruining the industry." The truth is that, of the 1.8 million shareholders, 1.1 million were small shareholders, having fewer than 500 shares. If the regulator's price capping in respect of TransCo is adhered to, those 1.1 million small shareholders will actually be better off losing £130 on the value of their shares because of the lower gas prices that they will have to pay. That says a lot.

I spoke earlier of the privatised industries externalising their costs through massive unemployment. If we add together the costs of unemployment arising from privatisation and the regulator's proposals in respect of TransCo, we find that the British people would be far better off if TransCo had remained nationalised. If the gas suppliers had competed properly to put their gas down the tubes, the nation would have been better off, we would have had the money to put into unemployment, and, generally speaking, people would have seen some value in return for the assets that were stolen from them by the Conservative Government.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West 6:07 pm, 21st November 1996

If any Conservative Members had doubted the wisdom of having this debate, those doubts must have been swept away by now. Clearly, we have flushed out Labour in respect of the extraordinary windfall tax about which Opposition Members have been talking for the past four years. The resulting headline might be, "New Labour, old attitudes".

I listened carefully to the speech by the hon. Member for Wolverhampton, North-East (Mr. Purchase), but I hope that he will forgive me if, because of the shortness of the time available, I do not follow him down some of the paths he laid out. However, at the beginning of his speech he commented on the regulators and the way in which they had not got going as strongly as they should have, and I think that that is unfair.

Although America had previously had regulators for monopoly industries, the privatisation programme in Britain broke new ground. I am not trying to make a party point, but the country owes a huge debt to the regulators. Some have been better than others and there are many different opinions about their effectiveness, but the regulators have tried hard and I think that they have been successful in getting to grips with the problem of how to regulate—especially in respect of prices—monopoly or near-monopoly industries.

If one wanted any proof of that, it is that, by and large, in all our utilities—with the exception of water companies, which are in a special position—prices have decreased considerably. If a regulator's job is to protect the consumer, the regulators have done their job well. As the hon. Member for Wolverhampton, North-East said, they could always press down prices a bit more, but: I shall not go too far down that road.

What has emerged from the debate is Labour's old wish to interfere. Labour has lost the intellectual battle on nationalisation versus privatisation. It has been a bitter blow. In the 12 years or so since privatisation started, Labour Members have opposed every privatisation because they did not believe in it. In a way, that was reasonable, because they believed in nationalisation, but they have had to face the fact that the privatisations have been highly successful on almost any measure that one cares to produce, whether it be the consumer's interests, investment, or getting politicians out of those industries' hair. It has been a bitter pill for the Labour party to swallow.

So what happens? Labour finds a different route. Labour Members do not propose to renationalise the utilities, but they would like to interfere in them. It would be more intellectually honest for them to tell the House and the country, "Yes, we want to run those businesses. We think that it is wrong that they are run by professional managers. We should like to run those industries if we ever formed a Government. We think that we would run them better"—not many people would agree, but that is what they would say—"so we would nationalise those industries and take them over." That would be more honest than trying to interfere through the back door using windfall taxes and so on.

Labour Members also appear to have forgotten—I hope that the hon. Member for Edinburgh, Central (Mr. Darling) will mention this—that the world has moved on since the early days of privatisation, and that companies based in other countries have invested in those businesses and bought the shares. Many of those utility companies are now owned by American or French companies.

Not so very long ago, we had a 13-year battle to get rid of a method of taxation in the United States that everyone agreed was wrong—corporate taxation by the unitary tax method. There was a huge fight, in which both sides of the House were agreed: an entirely non-partisan effort. In the end it was won, to the great advantage of Britain, because British companies in America had been damaged by what hon. Members on both sides of the House agreed was an unfair, unjust, damaging tax.

Now, in 1996, in Britain, we have the prospect—in the unlikely event that Labour forms a Government—of another tax which most commentators outside the Labour party believe to be very unfair. As I believe I was the person who recommended retaliatory action in Britain against a unitary tax, I could not complain if that unlikely event were to happen. I am sorry that we are obliged to go down the fairy-tale route of supposing that there might be a Labour Government but, in all fairness to the public, we should warn them of what might happen if that very unlikely event happens.

If that happens and Labour introduces that lovely windfall tax, we shall not be in a position to complain if the Americans reintroduce a unitary tax, saying, "You have done a bad thing to us so we shall do a bad thing to you." Those 13 years of hard work would be thrown away.

Photo of Mr David Shaw Mr David Shaw , Dover

My hon. Friend will appreciate that we have not yet heard an answer from the Labour party on how "excess profits" are to be defined. Does he feel that all the overseas investors into this country will now say to themselves, "Excess profits will be taxed by any future Labour Government if there is one, so should we invest in the United Kingdom?" Is he not worried that all the small businesses for which he has fought hard over the years now know that their profits are at risk because they might be defined by a future Labour Government as excess profits and obscene profits? Has not Labour today frightened 5 million business people in this country?

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

My hon. Friend makes a powerful point, which will be taken on board very widely by people, because the notion of "excess profits" is entirely subjective.

Let us suppose that one of the excellent small businesses that has been encouraged and helped to start by the benign regime of 17 years of Conservative government—low tax and all that stuff—has got going. Let us suppose that the firm is situated in Dover—an excellent place to be because it has an excellent Member of Parliament—and the firm invents a tremendous new product with fantastic scope and starts making a lot of money. The managers might say, "My goodness. There might be a Labour Government, and they might judge that our profit was obscene—whatever `obscene' means." It is an extraordinary route to take.

Madam Deputy Speaker, we have been told—I am sure that you will have heard it as well—that Labour has changed, that it now believes in all the things that the Conservatives believe in. I believe that there has been a change this afternoon. Labour Members were going one way; they have suddenly returned to a crossroads and are going off to the left again. They are saying, "We do not approve of profits" or "We do not approve of obscene profits"—but let us have a definition. They are saying that "profits" is a dirty word.

Photo of Ken Purchase Ken Purchase , Wolverhampton North East

You approve of obscene profits.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

The fact remains that the higher the profits, the bigger the corporation tax take, so there is more money for all the things that we all care about, such as education, and all the social services which always need more money. Taxation cannot be raised if there are no profits.

This is very boring stuff, I know. [Interruption.] Well, it is. We thought that Labour had left all that behind, but it has not. The great advantage of having held this debate is that we can warn people what Labour is really all about.

There is no excuse for a windfall tax on the privatised utility industries. The Opposition must know that there is no comparison with the one-off tax that was imposed on the banks, because they had inflated profits for an external reason—interest rates. Profits have been earned by the privatised utility industries because they have been well managed. They have made themselves efficient and made good profits by their own—internal—diligence. I use the word "good", not "obscene". That is different from the case of the banks. The banks did not argue with the tax. They had a one-off increase in their profits because of the very high interest rates, not as a result of their actions.

What will companies do if that unlikely event happens? We have been told that the regulators would not allow them to increase prices. I am not sure whether that will mean another piece of legislation to instruct the regulators not to allow the companies to pass the tax on in prices, but let us assume that Labour sits on the regulators and they say that the companies cannot pass on the tax in higher prices. What do the companies do then? Cut investment?

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

Or cut jobs? The accountants' report on the regional electricity companies—[Interruption.] The Opposition should listen to this; I am just about to conclude. The report says that, in the regional electricity companies, it is thought that they would have to cut about 6,000 jobs. The deputy leader of the Labour party said that all that money would go into job creation. It will not. The tax will destroy jobs.

This is a job destruction tax. I do not like soundbites, but that one should go out across the country. The job cannot be done by the regulators, according to Labour; so the price will be paid either in investment or in a loss of jobs—probably both. Today we have flushed out Labour on this subject, and the country should be duly warned. It is not just a question of a few remote companies suffering from the tax. The fact is that the improvements in these important utilities—water, electricity, gas,telecommunications—of the past few years would all be endangered. Investment would slump and there would be job cuts.

I believe that today the House has done a good job by drawing the attention of the country to what Labour's plans would mean. I hope that the electorate will see that this is a thoroughly dangerous and irresponsible tax, which shows up the old Adam in the Labour party.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Treasury) 6:20 pm, 21st November 1996

It is rather strange that we are having this debate at all this afternoon. Not untypically, it was led off by the Deputy Prime Minister, who rushed into the House in his usual fashion, launched his broadside, and then disappeared—doubtless to fight more fires burning throughout the Government, or possibly to deal with the fallout from the bombshell that the Government dropped somewhat imprecisely yesterday.

My earlier intervention revealed that the Government are using Government time to attack policies that they say will never be implemented—because there will be no change of Government—and using civil servants to cost Opposition programmes which they do not expect ever to be implemented, so there is no one left with any time to run the Government. But even that does not matter, because they will not be running the Government for much longer. In view of the foregoing, I suggest that the sooner we have the election, the better. Four months of this behaviour will not be good for the country.

A windfall tax is not the right approach, although it is perfectly legitimate for the Labour party to cost one of its own programmes. The Labour party needs to answer some serious questions about the idea, and soon. The Opposition cannot deny that there is a great deal of uncertainty surrounding who the tax will affect and how. I understand why they are not giving details about the who, the why and the how much; still, the uncertainty persists.

I could not help noticing earlier, sitting where I do, that the more uncertainty about the level of the tax and the number of companies it would affect, the more cheerful the Labour Members who sit below the Gangway in front of me became. They have all left now, but their behaviour suggested that the tax certainly appeals to old Labour—

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Treasury)

I am not being personal—hon. Members can call themselves what they like.

A point of principle is also at stake. This is retrospective taxation, and I believe that to be wrong. Moreover, if there have been excess profits, and if consumers have been ripped off, it is the very people from whom the profits have been made who should get the benefits of any rebate: in other words, the consumers.

It is impossible to raise billions of pounds from the privatised utilities without hurting millions of people. It is all very well to say that the regulators will hold down prices. If they do, something else will have to give—either the dividend, which will not concern Labour Members below the Gangway, or investment, which should concern us all, or the chance of a great deal more energy efficiency and the alleviation of fuel poverty by reducing fuel bills. The energy utilities could and should be involved in that.

We should also bear it in mind that there are 5 million shareholders who could be affected by such a tax; plus 17 million members of pension funds. It is just not honest, therefore, to suggest that this is a victimless tax which can be imposed without hurting anyone. That does not make it intellectually dishonest; the Labour party is entitled to its argument, which is that the windfall tax is a way of raising money. It is, but it is naive to suggest that no one will be affected by it.

The Deputy Prime Minister made one telling intervention in the speech by the deputy leader of the Labour party, who made an otherwise good and rumbustious contribution, which I thoroughly enjoyed. With his background, he clearly believes in these arguments with a great deal of conviction, but he did not convincingly answer the question about what will happen in year two after a one-off windfall tax.

There are some doubts in the Labour party as to where all this might lead. David Wighton, writing in today's Financial Times, has produced an article with the headline "Windfall's Big Chill". It says: Labour says it was told by its lawyers that, while there should be no fundamental legal problems with the proposed tax, it must take great care not to discriminate against particular companies. That would mean facing litigation, which in turn could result in a delay that could prejudice Labour's spending commitments.

The article also points out: However, the US energy groups which have committed almost £6 billion"— perfectly legitimately and legally— to buying UK regional electricity companies … could face a tax bill of more than £500 million and could argue they did not benefit from the earlier windfall. Mr. Wighton also states that the water regulator has suggested that a tax on the water utilities could lead to a rise in prices. The giveaway line comes in the last sentence of the article: But Labour insiders insist they will resist all attempts to undermine the tax, simply because it would jeopardise the party's only promise on extra public spending.

Therein lies the problem. Yesterday the Labour party responded to the Government's challenge—concerning the 89 promises that would cost £30 billion—by sending every available Labour spokesman to every studio in the country to say that it was all absolutely untrue: Labour has no spending commitments of any kind. There is no difference between the Labour party's programme and the Government's current programme, they claimed. That does make one wonder why anyone should bother to vote for a party that will make no difference.

The problem remains that a windfall tax can yield revenue for one year, but it will not pay for a programme for a whole Parliament. That leaves the Labour party somewhat exposed. It is why I conclude by saying that Opposition and Conservative Members alike might be well advised to read the Liberal Democrats' alternative Budget, published today—

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Treasury)

Not so. It is in fact a highly focused, costed programme, leading to a fully costed manifesto. Front Benchers of the two old parties are attempting to persuade the British people that gravity can be defied—that it is possible to reduce inflation and taxation and increase public spending. The sums of course do not add up; they would require rates of growth without inflation which no Government, Labour or Conservative, have every achieved.

If greater investment is needed in education, as we believe it is, it has to be paid for from honest sources of taxation which can be identified and which people can understand: such as a penny on the standard rate of income tax. A windfall tax would not deliver a credible programme or finance a Government for a full term. It would create so many confusions and uncertainties and hurt so many people that I believe the Labour party will live to regret it.

Photo of Mr David Shaw Mr David Shaw , Dover 6:29 pm, 21st November 1996

The country needs answers. We have not heard any answers from the Labour party today. We have not heard how excess profits or obscene profits are to be defined, but Labour tells us that people out there are earning them. There are 5 million business owners in Britain, who will be frightened stiff by today's debate. Labour will tax entrepreneurs, those with initiative and those who create jobs.

How on earth do Labour Members expect a windfall tax to create jobs? They say that they will create new training schemes, but when has a tax created jobs through new training schemes? Where in the solar system has there been a tax that created new, permanent jobs, especially in the private sector?

Taxes do not build profits. Taxes do not build products or provide services. Taxes do not create businesses. In my business career, I have been involved in 2,000 jobs being sustained or created. I have never created or sustained any of those jobs through taxation. Jobs are created by investing the profits of a business, not through taxation.

I regret that time does not permit me to debate the matter fully. Labour must provide many answers. I challenge the Opposition spokesman to define "excess profits" to the House.

Photo of Alistair Darling Alistair Darling Shadow Chief Secretary to the Treasury 6:30 pm, 21st November 1996

I do not know about the rest of the solar system, but I believe that the Government's own training programme, such as it is, is funded out of taxation. Like almost everything else that the hon. Member for Dover (Mr. Shaw) has ever said in the Chamber, his assertion is wide of the mark.

I am glad that we have had this debate, and that the Government have chosen to debate our policies in their time. For a party that keeps telling itself that there is no prospect of a change of Government, the Tories seem to be rather concerned about it.

The hon. Member for North-West Surrey (Sir M. Grylls) said about half a dozen times that he was sure there would be no change of Government, but just in case there was, he should raise various matters. Conservative Members protest too much. They know full well that people have had enough of them. In their desperation they know that their only chance now is to throw mud at us and hope that some of it sticks.

For the second time in one week, a Tory bombshell has blown up in their own hands. Yesterday they attempted to discredit us by making wild allegations about pledges that have never been made. Each one of the 89 was refuted quickly and shown to be nonsense.

Today we were told to expect great things from the Deputy Prime Minister, but that was yet another damp squib. He failed to rise to the occasion. I read in the Financial Times today that there is a new Tory campaign against the windfall tax which is to be led in part by the Deputy Prime Minister. Anyone who was thinking of joining and paying good money—good money, no doubt, from the profits of the privatised utilities—for that political campaign will have listened to what the Tories said and decided that they had better save their money. Whatever else happens, the Tory party will not be able to do much for them.

It is interesting that the Tories are setting up a campaign against the Labour party. Many people in the boardrooms and privatised utilities will think long and hard about joining a Conservative party political campaign to campaign against anything in the coming general election. Most of them will have enough sense to stay out of it and to leave the Tory party to flounder in its own desperation.

Despite the fact that the Government tell us that there is not enough parliamentary time to legislate on paedophiles or knife control, or for building societies legislation, or even to discuss Europe—one of the most crucial matters facing this Parliament and the next—they find time to discuss our policies in Government time. What an indictment of a Government who have had their day. After 18 years they are so desperate to cling to power that they spend Government time debating the Labour party's policies.

We welcome that opportunity, not just because it allows us to restate the value of the windfall tax, but because it draws attention to another problem facing the Government. The reason why they are not discussing Europe today is that they do not want to reveal the depth of the rift between the Chancellor of the Exchequer and the Euro-sceptics who make up an increasing proportion of the Conservative party.

It is a measure of the Government's desperation that they have chosen to side with the few who sit in the boardrooms of the privatised utilities against the many who have had to pay the 22 tax increases imposed by the Government, despite the fact that at the last election the Tories promised that they would not increase tax or national insurance and that they would not put VAT on gas and electricity. They did all that, yet they have the gall to attack us for our policies.

In the motion, the Tories have the temerity to refer to the "injustices" of our proposal. What do they know about injustice? What about the injustice of the one in five households in Britain where there is no one in work? Our proposal for a windfall tax is designed to fund a programme that will help young people and the long-term unemployed to get back to work. That is justice and, we believe, it makes good economic and social sense. That is why the tax is fully justified.

When we listen to the questions raised by Conservative Members during the debate, we recognise that the Tories are increasingly the political arm of the privatised utilities. It is a seamless garment, which we have seen today. We see it in the Financial Times article referring to a Tory Minister, a Tory Lord, a Tory media adviser, a privatised utility and a Tory campaign. Most people believe that any Government who embark on such behaviour have had their day, and the sooner they are out of office, the better for everyone.

Perhaps this is the first time that we have had a sponsored debate in this, the mother of Parliaments. Perhaps, like the weather forecast, the next debate will be sponsored by PowerGen. That is what the Government have reduced us to.

Unlike the Tories, we say what we intend to do and how we propose to fund it. As my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), the deputy leader of the Labour party, made clear in his excellent speech, we will tell the people of Britain what we intend to do. We have said for four years that we intend to impose a windfall levy on the privatised utilities.

The Tories said nothing about their windfall tax on the banks in 1981—not a word.

Photo of Alistair Darling Alistair Darling Shadow Chief Secretary to the Treasury

In a moment. The tax was sprung on the banks on the day that the then Chancellor introduced the measure. He could not say which banks or how it would work. Conservative Members say that the tax had to be imposed because the banks had made profits through no fault of their own. They should read the report of the Committee stage of that Bill on 12 May 1981, when the then Chief Secretary to the Treasury, now one of the European Commissioners, said that the fiscal requirement was necessary to achieve the public sector borrowing requirement. Is not that surprising? Does not history repeat itself? The Government were in deep debt in 1981 and they are in deep debt in 1996. After 18 years, it is the same story: the Tories put up taxes to pay for the debts that they have run up, because of the way in which they conduct the economy.

Photo of Mr Rod Richards Mr Rod Richards , Clwyd North West

The right hon. Member for Kingston upon Hull, East (Mr. Prescott) referred several times to "excessive profits". Will the hon. Gentleman define that term for the benefit of hon. Members?

Photo of Alistair Darling Alistair Darling Shadow Chief Secretary to the Treasury

I am exceedingly glad that I gave way to the hon. Gentleman, as he brings me neatly to the next part of my speech. The entire Tory thesis is that there have been no excessive profits. That is what they have all said, time and again. However, no one outside the Tory party holds that view. Industry knows that excessive profits have been made. Analysts have made that point. SBC Warburg, which has no connection with the Labour party, said: The ability of most companies to cope with the windfall tax is once again demonstrated.

Every time there has been a takeover, commentators and analysts believe that the case has been made. I quote from The Daily Telegraph, which is also not exactly a Labour publication. It said: Each time an electricity company is taken over, Labour's proposals for a Windfall Tax on utilities gains a little more respectability. Analysts and the privatised utilities admit that there have been excessive profits. The regulators have also encountered that problem: the electricity regulator fixed a price review only to discover that Northern Electric had found an extra £500 million to defend itself against the Telstar takeover. There is much evidence of excessive profits.

Such profits do not derive from the endeavours of those who run the companies—in many cases, they are the same people who were on the company boards before privatisation. It is interesting that often their first priority—Cedric Brown is a good example—is not to improve investment or to secure the company's future but to increase their salaries and grant themselves share options. The Government never condemned such behaviour.

The Conservatives say that a windfall tax would adversely affect investment. Let us look at what has happened. The Office of Water Services claimed that it required investment of £36 billion for the 1990s. In fact, the water companies have invested only £13.6 billion since privatisation and their current annual investment of £2.2 billion means that they will not meet the regulator's target. The idea that investment will somehow be affected by a windfall tax does not bear close examination.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Will the hon. Gentleman explain how excess profits will be defined? Perhaps I can help him: will it be based on the total return above the average for the FT share index since the date of flotation? If so, until what date?

Photo of Alistair Darling Alistair Darling Shadow Chief Secretary to the Treasury

The hon. Gentleman may recall that the Chancellor made the same point about an hour ago. When he was asked to reveal his plans for next Tuesday, he said that we would have to wait. Unlike the Conservatives, we have said that we intend to impose the windfall levy and we shall make our position absolutely clear when my right hon. Friend the Minister for Dunfermline, East (Mr. Brown) presents his Budget. As the hon. Gentleman is so concerned about the matter, perhaps he will reflect on the following information. South West Water has said that it can afford the windfall tax. A top director is quoted in last Sunday's The Observer as saying: We will be able to grow our dividend by 8 per cent. above inflation, even with a windfall tax". That is good news for the people of Exeter and Plymouth: we will be able to fund programmes to get the young unemployed back to work and their electricity company will be able to perform its functions perfectly well.

Any objective analysis of the privatised utilities will show that the tax is affordable. Conservative Members must face facts: that is the evidence from the market. If there are so many fears and so much uncertainty, why are overseas investors flocking to buy privatised utilities in this country? They know of the proposal—they must contemplate the possibility of a Labour Government in the next 12 months—and they are falling over themselves to buy the privatised utilities.

A large proportion of inward investment in this country comes from French and American companies which have bought privatised utilities. They do not come to this country because they are philanthropists—they do not simply fancy lighting up the midlands or providing water to the north-east of England. They are here because the companies are cash rich. An analyst told me last week that some companies have so much cash that they could afford to make purchases with their own cash. The figures show that that has nothing to do with efforts within those companies: it has to do with the way in which the taxpayer was short-changed by the Tory party in the early 1990s.

If Conservative Members believe that we are wrong, they should have a word with their shop steward, the chairman of the 1992 Committee. Last year he made it abundantly clear that he thought that consumers had had enough—they had had a raw deal—and he did not object to a windfall tax on utilities. Most objective advisers—even some Government Members—know that the windfall levy makes sense. When my right hon. Friend the deputy leader of the Labour party asked the Deputy Prime Minister whether his Cabinet colleagues contemplated such a proposal, he failed to answer—never mind the Opposition not answering questions.

The evidence shows that the utilities can bear the tax. The Institute of Directors—which is no friend of the Labour party—acknowledged that the utilities do have spare funds at the moment, and that the economic impact of the tax might therefore be insignificant. We must bear in mind not only the fact that the tax is justified but where the money will go. Persistently high levels of unemployment have made spending in this country difficult to control and have caused divisions in society.

Unlike the Conservatives, the Labour party believes that it is a duty of Government to give people an opportunity to succeed and to help themselves and their families. One of the best ways of achieving that is by helping people off benefit and into work. That is good socially and economically because people are in work, they earn a wage and they pay taxes—it is a virtuous cycle. We believe that the Government have a role to play in that area, which is why the windfall tax is justified.

On behalf of the Opposition, I profusely thank the Tories: they have done a great service to the people of this country by giving us the opportunity to justify the tax. The people know that they were short-changed by the Tory party when it sold off the utilities and by virtually every Government action since on tax and spending. They do not trust the Conservatives and they do not believe them. The people are looking for a change: they are looking to get back to work and for economic stability to allow this country to grow and be proud. They will get that under a Labour Government.

Photo of Michael Jack Michael Jack , Fylde 6:46 pm, 21st November 1996

The chances of that occurring are about as good as seeing pigs fly. I was struck when I looked at the front page of the Financial Times this morning and saw the headline, "Windfall tax: Labour clings to a bad idea". I have heard nothing in the debate that leads me to a different conclusion.

The hon. Member for Edinburgh, Central (Mr. Darling) reminds me of a contestant in the radio game where people must speak for a minute without deviating, hesitating or repeating themselves. The only repetition that he made was his repeated inability to answer any of the telling questions posed by my Back-Bench colleagues. He did not deviate from his unwillingness to tell the House and the country what the tax is about.

The hon. Gentleman asked why the debate was occurring in Government time. If he cares to pay attention, I shall tell him. The Government have a duty to warn the people of this country what the Labour party proposes. The problem is that the Labour party is so frightened by its policies that it has not thought out the tax thoroughly and it will not tell people the truth. In this debate, we can shine some light on what is happening in the economy.

The right hon. Member for Kingston upon Hull, East (Mr. Prescott) talked of excess profits, but he did not define them. Labour Members failed to define what a utility is, who will be affected by the tax, who will pay the tax and how it will be set. They are too frightened to tell the British people the truth about the windfall tax. They employed the subtle technique that operates along the lines of, "If we tell them about the means, perhaps that will justify the ends," and they talked a great deal about job creation.

The best antidote to a windfall tax is the Government's record. We have lowered unemployment by about 900,000 since its peak during the recession and we have the fastest growing major economy in western Europe. The Government can be proud of their job creation record. Some 210,000 people are now back in work.

Photo of Michael Jack Michael Jack , Fylde

Since last year. [Laughter.] That is an illustration of what happens when the Government take difficult economic decisions. All Opposition Members can do is laugh. Wait until the British people judge us on our economic record, which, since the last election, has made them £700 a year better off in real terms. Those are the real ways in which to judge the benefit of our economic policies, which are lowering unemployment, particularly for the young people about whom we have heard so much.

The right hon. Member for Kingston upon Hull, East tried to suggest that one justification for the tax was that privatised companies have been privatised too cheaply. He clearly has not had time to read the National Audit Office report, which made it absolutely clear that it was content with the way in which the Government had conducted those sales, and I believe that Her Majesty's Government's record has emerged very creditably on this score. The fact that the value of those companies has gone up is a tribute to the fact that the Conservatives had the courage to let them go, to have the benefit of private enterprise and private management. The same companies have invested and grown.

The right hon. Gentleman should look at the facts. He is very fond of bashing water companies and wandering around in the sewage of this debate. Let him just have a look. Since 1991, water and sewerage companies have made £7.8 billion in profit. But they have invested £15.1 billion, and they plan to go on to 2005 and invest some £24 billion. None of that could have been achieved if they had remained in the nationalised sector.

We were given a tour of all our yesterdays. One of the yesterdays for which the right hon. Gentleman was responsible was cuts in public investment. Does he remember them? Does he remember the cuts in nurses' pay? Does he remember the queues at the hospitals? That was his yesterday. That was the legacy that he bequeathed to this country. It has taken the courage of the Conservative Government and privatisation to make up for that lost time. It is a record of which we can be proud. [Interruption.] The right hon. Gentleman chastised us about the fact that we— [Interruption.]

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. Hon. Members who wish to contribute from the Dispatch Box should try to intervene. Sedentary comments or yelling are not acceptable.

Photo of John Prescott John Prescott Shadow Secretary of State, Deputy Leader of the Labour Party, Member, Labour Party National Executive Committee, Deputy Leader of the Official Opposition

I wonder whether the Minister can tell us what the level of unemployment was in the periods that he is talking about in the 1970s.

Photo of Michael Jack Michael Jack , Fylde


Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. The same applies to the hon. Member for Dover (Mr. Shaw).

Photo of Michael Jack Michael Jack , Fylde

In answer to the right hon. Gentleman, we now have more people in work than any other major European economy. That is testament to our economic strength.

The right hon. Gentleman chastised us over the question of our tax on the banks' interest. My right hon. Friend the Deputy Prime Minister dealt with that point. The right hon. Gentleman is very fond of sedentary rhetoric, but he clearly did not read, in his tour of all our yesterdays, what the Institute for Fiscal Studies said of the tax in 1981. It said that it had the merit of being applied to a well defined set of firms and of being charged on a tax base that was coherently related to the reasons given for introducing the tax. It was a tax on profits now, not several years later.

I heard somebody talk about retrospection. This is the biggest retrospective smash and grab raid of British industry that has been proposed. It goes against all the basic principles of what is a good tax.

Photo of Alistair Darling Alistair Darling Shadow Chief Secretary to the Treasury

The tax must have been retrospective. Indeed, the then Chief Secretary spent several pages in Hansard explaining why it was retrospective.

Photo of Michael Jack Michael Jack , Fylde

The hon. Gentleman knows that Chancellors, during any financial year, may make advance announcements of what they propose to enact in the next Finance Bill. The hon. Gentleman's proposal is to tax what he deems to be undefined levels of profit and gain in an undefined set of industries that happen to have been privatised many years ago. That, by any definition, is a retrospective tax.

The hon. Member for Gordon (Mr. Bruce), reminded us, quite rightly—

Photo of Michael Jack Michael Jack , Fylde

I certainly am not desperate. I have enough information to sink the hon. Member for Edinburgh, Central time after time on this tax.

The hon. Member for Gordon reminded us that somebody would have to pay for this tax, and there are no free lunches when it comes to tax. There are no regulators who can simply shut the door to requests from companies to review their pricing position. Mr. Andrew Dilnot, director of the Institute for Fiscal Studies, questioned whether a regulator was in a position to ensure that the windfall tax was not passed on to consumers. He said that the regulator could not change the pricing rules that he had previously set and that he could not control them in perpetuity. That means that when companies find the effect on their balance sheets, on their investment, on their pricing, they can come back to the regulator and ask for that to be taken into account.

The right hon. Member for Kingston upon Hull, East treated us to his interpretation of whether the companies could afford to pay the windfall tax. He mentioned the Warburg study. My right hon. Friend the Deputy Prime Minister read out the words of the study, in which it said that windfall taxation was unjust and arbitrary. My right hon. Friend did not have time to point out that the same study made it very clear that it expected some companies to meet the tax simply by borrowing. I point out to the right hon. Gentleman that much scorn has been poured on the head of Mr. Chatwin of Yorkshire Electricity, but he made it clear that his company is not one that is awash with cash, and his company is now offering people the cheapest electricity in the country. His customers have had a 25 per cent. reduction in real terms. His company now pays double the amount of corporation tax. He said that the company would have to raise its borrowings to pay for this tax, and cut back its investment.

I come back to the central issue: why did we call this debate? [Interruption.] Like all laughing donkeys, right hon. and hon. Members on the Opposition Benches make one simple noise—the noise of embarrassed laughter, because we have flushed out their inability to answer fundamental questions about the windfall tax. I remind them of what the right hon. Member for Derby, South (Mrs. Beckett) said on 16 November, when interviewed on television. She was probed about what type of enterprise would be subject to the tax. She said: We don't rule out any of the privatised companies"— That is a pretty broad field. She then said that Labour would see whether

a monopoly element would be part of the consideration". What on earth does a "monopoly element" mean? It is either a monopoly or it is not. Increasingly, throughout the utilities, there is competition—in electricity and gas, and there is massive competition in telecommunications. Opposition Members cannot say what on earth that definition is. Even among themselves they cannot agree the strategy.

The hon. Member for Edinburgh, South (Mr. Griffiths), in replying to a debate on energy policy on 16 July this year, said that the utilities tax will last as long as salaries as long as telephone numbers are paid to directors in the boardroom."—[Official Report, 16 July 1996; Vol. 281, c. 1043.] It is my contention that the hon. Gentleman understood the long-lasting effect of the tax. It is obvious.

I do not think that Opposition Members realise just how badly this tax is playing. In November, a headline in The Independent said: There is no fair way for Labour to levy this tax". On 9 November, a headline in The Guardian said, "Britain's windfall, Labour's dilemma". Again in The Independent a headline reads: Labour gets itself in a pickle over utilities tax". It is not playing well outside. This debate will have flushed out the inadequacies of the Opposition in answering those questions. It is a discriminatory, arbitrary and essentially random tax, and it will never be consistently applied. It is retrospective. It attacks company dividends. It attacks pensioners, pension funds and employees. Above all, it attacks this country's record as a low-tax economy for business, which has provided economic growth and has brought falling unemployment. With our record on falling unemployment, there will never be a need for such a tax.

Question put, That the amendment be made:—

The House divided: Ayes 212, Noes 254.

Division No. 17][7 pm
Abbott Ms DianeEastham, Ken
Ainger, NickEtherington, Bill
Ainsworth, Robert (Cov'try NE)Fatchett, Derek
Anderson, Ms Janet (Ros'dale)Field, Frank (Birkenhead)
Armstrong, Ms HilaryFlynn, Paul
Ashton, JosephFoster, Derek
Austin-Walker, JohnFraser, John
Banks, Tony (Newham NW)Fyfe, Mrs Maria
Barnes, HarryGalbraith, Sam
Barron, KevinGapes, Mike
Battle, JohnGarrett, John
Bayley, HughGerrard, Neil
Beckett, Mrs MargaretGilbert, Dr John
Bell, StuartGodman, Dr Norman A
Benn, TonyGolding, Mrs Llin
Benton, JoeGraham, Thomas
Bermingham, GeraldGrant, Bernie (Tottenham)
Berry, RogerGriffiths, Win (Bridgend)
Blair, TonyGrocott, Bruce
Boateng, PaulGunnell, John
Bray, Dr JeremyHain, Peter
Brown, Gordon (Dunfermline E)Hall, Mike
Brown, Nicholas (Newcastle E)Hanson, David
Burden, RichardHattersley, Roy
Byers, StephenHenderson, Doug
Caborn, RichardHeppell, John
Callaghan, JimHill, Keith (Streatham)
Campbell, Mrs Anne (C'bridge)Hinchliffe, David
Campbell, Ronnie (Blyth V)Hodge, Ms Margaret
Campbell-Savours, D NHoey, Miss Kate
Canavan, DennisHogg, Norman (Cumbernauld)
Cann, JamieHome Robertson, John
Church, Ms JudithHoon, Geoffrey
Clapham, MichaelHowarth, Alan (Stratf'd-on-A)
Clarke, Eric (Midlothian)Howarth, George (Knowsley N)
Clarke, Tom (Monklands W)Howells, Dr Kim
Clelland, DavidHoyle, Doug
Coffey, Ms AnnHughes, Kevin (Doncaster N)
Connarty, MichaelHughes, Robert (Ab'd'n N)
Cook, Robin (Livingston)Hughes, Roy (Newport E)
Corbett, RobinHutton, John
Corston, Ms JeanIngram, Adam
Cousins, JimJackson, Mrs Helen (Hillsborough)
Cox, TomJamieson, David
Cummings, JohnJanner, Greville
Cunliffe, LawrenceJenkins, Brian D (SE Staffs)
Cunningham, Jim (Cov'try SE)Jones, Barry (Alyn & D'side)
Dalyell, TamJones, Jon Owen (Cardiff C)
Darling, AlistairJones, Dr L (B'ham Selly Oak)
Davidson, IanJones, Martyn (Clwyd SW)
Davies, Denzil (Llanelli)Jowell, Ms Tessa
Davis, Terry (B'ham Hodge H)Kaufman, Gerald
Dewar, DonaldKeen, Alan
Donohoe, Brian HKennedy, Mrs Jane (Broadgreen)
Dowd, JimKhabra, Piara S
Dunwoody, Mrs GwynethKilfoyle, Peter
Eagle, Ms AngelaLestor, Miss Joan (Eccles)
Lewis, TerryRadice, Giles
Livingstone, KenRandall, Stuart
Lloyd, Tony (Stretf'd)Raynsford, Nick
Loyden, EddieReid, Dr John
McAllion, JohnRoche, Mrs Barbara
McAvoy, ThomasRooker, Jeff
McCartney, Ian (Makerf'ld)Rooney, Terry
Macdonald, CalumRoss, Ernie (Dundee W)
McFall, JohnRowlands, Ted
McKelvey, WilliamRuddock, Ms Joan
McMaster, GordonSheerman, Barry
MacShane, DenisSheldon, Robert
McWilliam, JohnShore, Peter
Madden, MaxSimpson, Alan
Mandelson, PeterSkinner, Dennis
Marek, Dr JohnSmith, Andrew (Oxford E)
Marshall, David (Shettleston)Smith, Chris (Islington S)
Marshall, Jim (Leicester S)Smith, Llew (Blaenau Gwent)
Martin, Michael J (Springburn)Soley, Clive
Martlew, EricSpearing, Nigel
Maxton, JohnSpellar, John
Meacher, MichaelSteinberg, Gerry
Meale, AlanStevenson, George
Michael, AlunStott, Roger
Michie, Bill (Shef'ld Heeley)Strang, Dr Gavin
Milburn, AlanStraw, Jack
Miller, AndrewSutcliffe, Gerry
Morgan, RhodriTaylor, Mrs Ann (Dewsbury)
Morley, ElliotTimms, Stephen
Morris, Alfred (Wy'nshawe)Tipping, paddy
Morris, John (Aberavon)Touhig, Don
Mowlam, Ms MarjorieTrickett, Jon
Mudie, GeorgeTurner, Dennis
Mullin, ChrisVaz, Keith
Murphy, PaulWalker, Sir Harold
Oakes, GordonWalley, Ms Joan
O'Brien, Mike (N Warks)Wardell, Gareth (Gower)
O'Brien, William (Normanton)Wareing, Robert N
Olner, BillWatson, Mike
O'Neill, MartinWicks, Malcolm
Parry, RobertWilliams, Alan (Swansea W)
Pearson, IanWilliams, Alan W (Carmarthen)
Pendry, TomWinnick, David
Pickthall, ColinWise, Mrs Audrey
Pike, Peter LWorthington, Tony
Prentice, Mrs B (Lewisham E)Wright, Dr Tony
Prentice, Gordon (Pendle)Young, David (Bolton SE)
Prescott, John
Primarolo, Ms DawnTellers for the Ayes:
Purchase, KenMr. Greg Pope and
Quin, Ms JoyceMr. Clive Betts.
Ainsworth, Peter (E Surrey)Bright, Sir Graham
Alison, Michael (Selby)Brooke, Peter
Allason, Rupert (Torbay)Brown, Michael (Brigg Cl'thorpes)
Amess, DavidBrowning, Mrs Angela
Arbuthnot, JamesBruce, Ian (S Dorset)
Arnold, Jacques (Gravesham)Burns, Simon
Atkins, RobertBurt, Alistair
Atkinson, Peter (Hexham)Butterfill, John
Baker, Nicholas (N Dorset)Carlisle, John (Luton N)
Batiste, SpencerCarlisle, Sir Kenneth (Linc'n)
Bellingham, HenryCarrington, Matthew
Bendall, VivianCarttiss, Michael
Beresford, Sir PaulCash, William
Biffen, JohnChannon, Paul
Bonsor, Sir NicholasChapman, Sir Sydney
Booth, HartleyClappison, James
Boswell, TimClark, Dr Michael (Rochf'd)
Bottomley, Peter (Eltham)Clarke, Kenneth (Rushcliffe)
Bowden, Sir AndrewCoe, Sebastian
Bowis, JohnColvin, Michael
Boyson, Sir RhodesCongdon, David
Brandreth, GylesConway, Derek
Brazier, JulianCoombs, Anthony (Wyre F)
Coombs, Simon (Swindon)Jenkin, Bernard (Colchester N)
Cope, Sir JohnJessel, Toby
Couchman, JamesJones, Gwilym (Cardiff N)
Cran, JamesJones, Robert B (W Herts)
Currie, Mrs EdwinaKey, Robert
Curry, DavidKing, Tom
Davies, Quentin (Stamf'd)Kirkhope, Timothy
Day, StephenKnapman, Roger
Deva, Nirj JosephKnight, Mrs Angela (Erewash)
Devlin, TimKnox, Sir David
Dover, DenKynoch, George
Duncan, AlanLait, Mrs Jacqui
Duncan Smith, IainLang, Ian
Dunn, BobLawrence, Sir Ivan
Dykes, HughLegg, Barry
Elletson, HaroldLennox-Boyd, Sir Mark
Evans, David (Welwyn Hatf'ld)Lester, Sir Jim (Broxtowe)
Evans, Jonathan (Brecon)Lidington, David
Evans, Nigel (Ribble V)Lloyd, Sir Peter (Fareham)
Evans, Roger (Monmouth)Lord, Michael
Evennett, DavidLuff, peter
Faber, DavidMacGregor, John
Fabricant, MichaelMackay, Andrew
Fenner, Dame PeggyMaclean, David
Field, Barry (Isle of Wight)McLoughlin, Patrick
Forman, NigelMcNair-Wilson, Sir Patrick
Forsyth, Michael (Stirling)Maitland, Lady Olga
Forth, EricMajor, John
Fowler, Sir NormanMalone, Gerald
Fox, Dr Liam (Woodspring)Mans, Keith
Fox, Sir Marcus (Shipley)Marshall, John (Hendon S)
Freeman, RogerMarshall, Sir Michael (Arundel)
French, DouglasMartin, David (Portsmouth S)
Gale, RogerMawhinney, Dr Brian
Gardiner, Sir GeorgeMellor, David
Garel-Jones, TristanMerchant, Piers
Garnier, EdwardMills, Iain
Gill, ChristopherMitchell, Andrew (Gedling)
Gillen, Mrs CherylMitchell, Sir David (NW Hants)
Goodlad, AlastairMoate, Sir Roger
Goodson-Wickes, Dr CharlesMonro, Sir Hector
Gorman, Mrs TeresaMontgomery, Sir Fergus
Gorst, Sir JohnNeedham, Richard
Grant, Sir Anthony (SW Cambs)Nelson, Anthony
Greenway, Harry (Ealing N)Neubert, Sir Michael
Greenway, John (Ryedale)Nicholson, David (Taunton)
Griffiths, Peter (Portsmouth N)Norris, Steve
Grylls, Sir MichaelOnslow, Sir Cranley
Hague, WilliamOppenheim, Phillip
Hamilton, Sir ArchibaldPage, Richard
Hamilton, Neil (Tatton)Paice, James
Hampson, Dr KeithPatnick, Sir Irvine
Hannam, Sir JohnPatten, John
Hargreaves, Andrewpattie, Sir Geoffrey
Harris, DavidPawsey, James
Haselhurst, Sir AlanPickles, Eric
Hawkins, NickPorter, David
Hawksley, WarrenPortillo, Michael
Hayes, JerryPowell, William (Corby)
Heald, OliverRathbone, Tim
Heath, Sir EdwardRedwood, John
Heathcoat-Amory, DavidRenton, Tim
Hendry, CharlesRichards, Rod
Heseltine, MichaelRiddick, Graham
Higgins, Sir TerenceRobathan, Andrew
Hill, Sir James (Southampton Test)Roberts, Sir Wyn
Horam, JohnRobinson, Mark (Somerton)
Hordern, Sir PeterRowe, Andrew
Howard, MichaelRumbold, Dame Angela
Howell, David (Guildf'd)Ryder, Richard
Howell, Sir Ralph (N Norfolk)Sackville, Tom
Hunt, David (Wirral W)Shaw, David (Dover)
Hunt, Sir John (Ravensb'ne)Shaw, Sir Giles (Pudsey)
Hunter, AndrewShephard, Mrs Gillian
Jack, MichaelShepherd, Sir Colin (Heref'd)
Jackson, Robert (Wantage)Sims, Sir Roger
Skeet, Sir TrevorTracey, Richard
Smith, Tim (Beaconsf'ld)Tredinnick, David
Smyth, Rev Martin (Belfast S)Trend, Michael
Soames, NicholasTrotter, Neville
Speed, Sir KeithVaughan, Sir Gerard
Spencer, Sir DerekWaldegrave, William
Spicer, Sir Jim (W Dorset)Walden, George
Spicer, Sir Michael (S Worcs)Walker, Bill (N Tayside)
Spink, Dr RobertWard, John
Spring, RichardWardle, Charles (Bexhill)
Sproat, IainWaterson, Nigel
Squire, Robin (Hornchurch)Watts, John
Stanley, Sir JohnWells, Bowen
Steen, AnthonyWhitney, Ray
Stephen, MichaelWhittingdale, John
Stern, MichaelWiddecombe, Miss Ann
Stewart, AllanWiggin, Sir Jerry
Streeter, GaryWilkinson, John
Sweeney, WalterWilletts, David
Sykes, JohnWilshire, David
Tapsell, Sir PeterWinterton, Mrs Ann (Congleton)
Taylor, Ian (Esher)Winterton, Nicholas (Macclesf'ld)
Taylor, Sir TeddyWolfson, Mark
Temple-Morris, PeterWood, Timothy
Thomason, RoyYeo, Tim
Thompson, Sir Donald (Calder V)Young, Sir George
Thompson, Patrick (Norwich N)
Thornton, Sir MalcolmTellers for the Noes:
Townend, John (Bridlington)Mr. Michael Bates and
Townsend, Cyril D (Bexl'yh'th)Mr. Richard Ottaway.

Question accordingly negatived.

Main Question put and agreed to.

Resolved,That this House deplores the dangers and injustices inherent in the concept of a windfall tax on the privatised utilities and condemns a tax that would hit consumers, shareholders and pensioners while damaging the credibility of the United Kingdom as a stable regime for inward investment.