Comment: Labour can't separate the utility sheep from goats

When is a utility not a utility? Come to think of it, when is a monopoly not a monopoly? When there's a windfall profits tax in prospect seems to be the answer. Sir Iain Vallance's extraordinary assertion yesterday that he would not have voted Labour had he realised it might try and hit BT with its proposed windfall tax on the excess profits of privatised utilities rather begs the question of why he thought he was going to escape it in the first place.

The answer he gave yesterday was that BT is neither a utility nor a monopoly, an argument which intriguingly is also used by Sir John Egan of BAA (the former British Airports Authority). To Sir Iain's mind, running a public telephone network is apparently not the same thing as running a utility. Nor does having 90 per cent of all domestic telephone subscribers add up to being a monopoly. Mmmm. Sir John uses much the same fuzzy logic. Airports cannot be defined as a utility, he argues, nor does BAA have a monopoly. So where are the transatlantic jumbos meant to land: Biggin Hill?

Leaving aside this slightly unreal debate in semantics, there's more than a chance that the real source of Sir Iain's misinformation was the horse's mouth itself - Tony Blair. Mr Blair is temperamentally against the tax, which he rightly sees as arbitrary and oppressive. But the money for welfare to work has to come from somewhere, so he accepts it as a necessary evil. However, to Mr Blair's mind there are good utilities and bad ones; BT falls into the former category, for it operates in a competitive market place and is a company Britain can justifiably be proud of.

At the genesis of the windfall tax policy, then, there was a good chance of BT being excluded. Mr Blair even hinted at it in his various public pronouncements on the tax. Then along came the problem of definition - how to distinguish the privatised companies Labour does want to hit, without actually naming them, from those it does not. It proved an impossible task. Furthermore, Labour has been subjected to a furious lobbying campaign from those who always were going to be hit to spread the net as widely as possible.

The upshot is that Mr Blair has lost the argument to Gordon Brown and BT is now very definitely to be included. What this will do to the love affair between BT and New Labour is anyone's guess. Sir Iain insisted yesterday that despite the possibility of taking legal action against the Government, he wouldn't be taking his ball away. He still wished to establish a close working partnership with the new administration.

The damage has nonetheless been done. In terms of public relations, it really wasn't a smart move for Sir Iain to come over all indignant about the windfall tax on the day the company announced a pounds 3bn profit. Indeed his comments could reasonably be described, as they were by Government sources yesterday, as politically naive. Other utilities are choosing stoically to swallow their medicine in public while complaining loudly in private. Given that there is absolutely nothing anyone can now do to stop the tax, that would rather seem to be the more mature and fruitful approach.