Utility Week

UTILITY Week 10th April 2015

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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UTILITY WEEK | 10TH - 16TH APRIL 2015 | 13 E L E CT I O N C O U N TD O W N : 2 7 D AY S TO G O Should investors be taxed or wooed? Billions of pounds are needed for infrastructure investment, but the companies supposed to provide them are being lined up for a tax hit. Lobby Election / Party conferences T he UK is desperate for investment to renew its utility infrastructure – £100 billion is needed in the power sector by 2020, while the water companies have plans to spend £44 billion over the same period. The politicians blame each other for the situation. The Conservatives blame Labour for "chronic underinvestment" in the Blair/ Brown era, while Miliband accuses Cameron and Osborne of only attracting "half the level needed". Away from the politicking, it is clear that UK utilities are largely relying on infrastruc- ture decades old. Past glories are power- ing the present, but the sweated assets will not cope with the growing and increasingly more complex demands of the future. Historically, the UK has been a happy home for investors' cash, with political and regulatory stability providing predictable, steady returns. But things are less certain now. Mixed policy messages, the threat of significant political intervention, tighter regulation and a crackdown on the rate of return have chipped away at confidence. The country is still attractive compared with its rivals, but risk is growing. Utility investors play the long game. Assets last decades, so they deliver long- term returns. But profit has almost become a dirty word. Some Labour politicians ask why the big corporations and investors should be allowed to make so much money when hard- working families are struggling? Their answer appears to be to tax the big corporations more. As a bonus, taxing the multinational corporations more also helps fill some of the £90 billion budget deficit. Labour has also set its stall out for a crackdown on the water companies and the tax they pay. Shadow environment secretary Maria Eagle highlighted in her 2014 confer- ence speech that from £2 billion profit in 2013, the water companies paid only £74 mil- lion in tax, and £1.8 billion in dividends "to foreign hedge funds and anonymous private owners – the privileged few". She stated Labour would stop the water companies "siphoning off " money, and ensure they paid a fair share of tax. All of this uncertainty is being introduced at a time when it is least welcome. Concerns of an investment hiatus continue to grow; some say we're already suffering. The election will, hopefully, return a stable and secure government, with clear objectives and an acknowledgement that investors need a stable fiscal, policy and tax- ation regime. This money will then not only generate them a return, but allow gas, water and electrons to continue to flow. In partnership with: "The best off in society have got to contribute more, and that includes companies." Business secretary Vince Cable (Lib Dem) "Economic activity should be taxed where it takes place. The ques- tion for all politi- cians to grapple with is finding an effective way to get to that point." Shabana Mahmood, shadow minister, treasury (Lab) "The government should consider greater transpar- ency so that the public knows whether compa- nies are paying a fair share [of tax]." Margaret Hodge, chair of the Public Accounts Committee Quote me UTILITY WEEK LOBBY POLL TRACKER 1 Apr 2015 – YouGov poll Party Share Change (from 27 Mar) Conservatives 36% 0 Labour 34% 0 Lib Dems 8% +1 Ukip 13% 0 Green 4% -1 Other 5% 0 Next week: Social policy and affordability

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