New legislation must be used to tackle alleged tax-dodging by Yorkshire Water, the Government has been told.

Skipton MP Julian Smith called for “exciting policies” in the looming Water Bill to prevent firms avoiding corporation tax by taking on debt.

The Tory MP has waged war on Bradford-based Yorkshire Water, accusing it of behaving like a “casino utility” by dodging tax, despite making huge profits.

During a Commons debate, Mr Smith conceded that the company had “done some positive things on infrastructure and flooding”.

But he told ministers: “The financial situation and decisions of Yorkshire Water show that it is exploiting my constituents and people across Yorkshire.”

The MP said the company had announced an operating profit of £331 million, while hiking bills by 6.6 per cent, to an average of £356. Meanwhile, dividend payments had quadrupled to £256 million – yet Yorkshire Water paid no corporation tax in the last financial year, because of interest paid on debts topping £4 billion. Mr Smith also read out the earnings of chairman Kevin Whiteman (£1.07 million), chief executive Richard Flint (£1.09 million) and director of finance Liz Barber (£476,000).

And he said: “Those highly paid, highly compensated board members showed no contrition about how tough it is at the moment for consumers.

“They basically said that they would not budge on their stretching of the tax rules to ensure that they paid no tax. The situation is a kick in the teeth from Yorkshire Water to hard-working people.”

The Water Bill – only published in draft form so far – will allow businesses to choose supplier, which ministers hope will promote competition and bring down bills.

The Ofwat watchdog is also to be given more power to ensure companies are not overcharging.

However, a spokesman for Yorkshire Water said: “We have always been nothing less than completely open and honest around our accounts.

“Our prices, and our capital expenditure programme, are regulated by Ofwat and judged as good value for money by our customers and by the consumer body, CCWater.”