Hutton warns over energy policy

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Business Secretary John Hutton has appeared to warn against imposing a windfall tax on energy companies.

He told the Daily Telegraph the "right framework" was needed to ensure £100bn was invested in nuclear, renewables and clean coal power stations.

About 80 Labour MPs have indicated they support the idea of a tax to claw back some of the energy companies' profits.

But Mr Hutton said: "What we shouldn't do is create a climate that makes it harder to attract new investment."

He said: "We need £100bn plus in the next 10 years, so we've got to create the right framework that encourages investment. We must not lose sight of that."

Despite the pressure from Labour MPs on Prime Minister Gordon Brown to bring in a windfall tax Chancellor Alistair Darling is believed to oppose the idea.

The prime minister's spokesman said this week: "The position on tax is a matter for the chancellor and the Treasury. The Treasury receives a whole range of representations and of course will consider such representations in the normal way."

'Legalised raid'

While a windfall tax has not been ruled out, it is understood the prime minister is looking at an alternative levy on carbon emissions.

David Porter, chief executive of the Association of Electricity Producers, said a windfall tax on firms' profits could break the trust between government and industry and mean more investors head abroad.

There is genuine concern about the difficulties people will face paying heating bills over the coming winter and we are looking at extra support John HuttonBusiness Secretary <a class="" href="/1/hi/business/7582267.stm">Analysis: Could windfall tax work?</a>

He said: "A legalised raid on the company's bank accounts - that would be very unhelpful because it would scare off investors and also could make the cost of investment much higher and, in the end, that would end up on the customers' bills."

Mr Hutton said that the government had "genuine concern" about the problems caused for many families by the big rises in heating bills.

He told the Telegraph ministers were looking at what extra support it could provide.

"The era of cheap energy is over. The question is how we are going to adjust to that and what sort of help can we provide to those who are going to struggle the most.

"There is genuine concern about the difficulties people will face paying heating bills over the coming winter and we are looking at extra support."

When Labour came to power in 1997 it imposed a windfall tax on utility companies - privatised under the Conservatives - to fund the welfare-to-work New Deal programme. But that tax had been announced in the party's manifesto.