Thames Tideway Tunnel

Lord Davies of Oldham Excerpts

Wednesday 24th July 2013 Lords Chamber

[Lord De Mauley]

My Lords, because the major problem is below there.

[Lord Davies of Oldham]

My Lords, when, some three decades ago, the Conservative Government privatised water, did they expect that a company such as Thames Water would pay no corporation tax in the past year, as has been stated, despite considerable profits and a major distribution of dividends, and that it would then come to the taxpayer for necessary investment on this major project? What will be the basis of equity in these terms as far as this private company is concerned?

[Lord De Mauley]

My Lords, I thought I had addressed that question when I answered the noble Lord, Lord Berkeley. Thames Water does not avoid paying tax. HMRC’s capital allowance regime allows companies to delay—not to avoid—paying corporation tax, based on how much they invest. Capital allowances are simply the allowed amortisation of an asset for tax purposes and they exist to encourage companies to carry out crucial investment. The mechanism enables tax to be paid over the lifetime of the asset. If capital allowances did not exist, that would mean either less investment or higher bills for customers.