Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 10th July 1997.
To ask the Chancellor of the Exchequer what assessment he has made of the impact of his Budget on investment by the water utilities. 
After consulting the regulators, it is my judgment that the windfall tax can be paid without any impact on investment.
Can the right hon. Gentleman tell the House how he expects the privatised utilities to pay the £5 billion he is asking of them without increasing their charges, which means higher water bills; reducing their investment, which means more leakages; cutting employment; or reducing dividends, most of which go to pension funds?
I can say what I can because the water industry regulator has just said publicly that he would not expect any of the water companies to reduce their commitments. He has taken what I consider to he an objective view: that water companies have made excess profits that were recognised by Conservative Members when they reported from the Public Accounts Committee before the election and are perfectly capable of paying the windfall levy. It is interesting to note that the water companies are ready to pay, but, once again the Conservative party remains isolated as the one group in society which believes that they should not pay.
Is it not a fact that when the water companies were privatised, they received massive cash handouts from the then Tory Government and they faced no competition, as we could get our water from only one company and have our sewage dealt with by only one company? Is it not the case that, to date, North West Water has failed to deliver an improved service and deal with leaks, and the directors have made massive profits out of the privatisation?
What people will remember about the water companies over the past few years is that, under the Conservative Government, they made massive profits, there was an 80 per cent. increase in prices, substantial dividends were paid out, but very little corporation tax was paid. Indeed, in some cases, the water companies paid no mainstream corporation tax at all. All that was defended by the Conservative Government. The Public Accounts Committee estimated the replacement value of the water and sewerage companies' assets to be £138 billion and the profit that the Government received from the sale was £3 billion.
Will the Chancellor continue to insist that investment by the utilities will be unaffected as a result of the imposition of the windfall tax, even if the utilities themselves insist and demonstrate otherwise?
I am grateful to the hon. Gentleman for pointing out that the water companies have substantial obligations to the public. I believe that they are perfectly capable of making those investments. Over the past few years, there have been share buy-backs, handouts to shareholders and special dividends as well as the excesses in the boardroom. Water companies should be enhancing their investment programme and we are determined that that will happen.