Utilities chiefs to step up windfall tax onslaught

Heads of several of the privatised utilities are to step up their lobbying campaign against Labour's proposed windfall tax at a private meeting with Tony Blair next week. Sources suggest the dinner, hosted by the Confederation of British Industry, is likely to include a speech by Mr Blair reiterating Labour's commitment to the policy.

Around 100 senior business leaders will attend the dinner at the CBI's central London headquarters, including some regional electricity companies and water companies.

The news emerged as the CBI, whose director general is Adair Turner, intensified its opposition to the tax in a consultation paper, which will be released today. Peter Agar, the organisation's deputy director general, said the tax would amount to "extremely bad legislation". The tough stance suggests Mr Blair has some way to go to convince firms Labour's policies are pro-business.

Mr Agar claimed Labour would have serious difficulty turning the tax into a formal policy if the party won the next election. "I've no doubt that there are various parliamentary draftsmen tearing their hair out," he said. "The utilities must be controlled by a clear regulatory regime for those parts of their business where they have a monopoly, not through one-off taxes on profits."

The CBI's document, called "Regulating the Regulators" claims utility privatisation has been a success, and insists only minor reforms of regulation are necessary. "You need to identify why you need a case for radical reform. We don't believe there is a case for radical reform," Mr Agar said.

The paper rejects many of the measures under discussion by Labour for reforming utility regulation, including replacing individual regulators with boards of members and scrapping price regulation in favour of profit sharing. "The regulatory framework has done a pretty good job. It's not perfect but it needs evolution, not revolution," Mr Agar said.

However the CBI admitted that representatives of the all the various privatised industries had helped to write the report. Consumer groups had not been consulted.

The main proposal is that individual regulators should be retained, but supported by boards of non-executive directors to make decisions more transparent to the public.

Another idea is for a beefed-up consumer voice for water and electricity industries, using the Gas Consumers Council as a template. In addition, a shorter appeals procedure should be introduced to avoid full referrals to the Monopolies and Mergers Commission for less complicated disputes.