Private Equity: MPs head for showdown with buy-out bosses

Senior Labour MPs and union leaders joined the growing chorus of protest over tax breaks worth hundreds of millions of pounds to leaders of the private equity industry. Candidates for Labour's deputy leadership criticised the controversial corporation taper relief, which can cut tax bills for private equity firms to as low as 10 per cent.

Peter Hain, the Northern Ireland Secretary and a contender for the party's deputy leadership, called for a review of the tax breaks for private equity firms. The comments came ahead of today's appearance by four leading figures in the private equity industry before the Treasury Select Committee.

Union leaders joined the clamour for reform amid claims that tax breaks introduced by Labour to promote entrepreneurship can allow private equity bosses to pay less tax than their cleaners.

The giant GMB and Unite unions will condemn private equity firms when they give evidence today to the powerful Commons Treasury Select Committee, claiming that the firms cut jobs, damage pension funds and create huge debts.

Jack Dromey, deputy general secretary of Unite, said: "These firms are like Robin Hood in reverse." The GMB condemned the tax concessions as "unfair and unjustifiable" and said the Treasury would gain £4bn if the "loophole" was closed.

Mr Hain also threw his weight behind a revision of the present system. "I believe we should review the current tax treatment of private equity with a view to levelling the playing field," he said. "Private equity does add value to our economy - but that should be on the basis of bringing in genuine efficiencies and sharper management, not unfair tax advantages or asset-stripping."

Gordon Brown has already launched a review of the tax breaks to private equity firms.

The Liberal Democrats increased pressure for reform yesterday, calling for taper relief on capital gains tax to be abolished. The relief allows private equity companies to cut capital gains tax to 10 per cent if they have owned an asset for as little as two years.

Jon Cruddas, the Labour deputy leadership contender, said: "Private equity bosses are themselves split about the fairness of the tax breaks they enjoy so it is absolutely right that this multibillion-pound business is subjected to government scrutiny and public debate."

Hilary Benn, the International Development Secretary and deputy leadership contender, said: "These investors can help secure business but like every other part of society, private equity has to show its social responsibility. Some people are doing very well for themselves in modern Britain. I think we should ask them what they are giving back to society."

The top 10 venture capitalists and their wealth

Hugh Osmond, 45

Sun Capital, £320m

The former doctor first made his mark in the early 1990s with a takeover of PizzaExpress before building his fortune by buying and selling pub chains.

Sir Ronald Cohen, 61

Bridges, £260m

One of the founding fathers of private equity. Now focuses on investments for deprived areas. An Egyptian by birth, he lives in one of the largest houses in London and is a friend of Gordon Brown.

Guy Hands, 46

Terra Firma, £250m

Began to build his fortune while working for the Japanese bank Nomura by buying pub chains and military married quarters. Has funded his own hotel chain.

Nemir Kirdar, 70

Investcorp, £200m

Founded Investcorp in the early 1980s after escaping from his native Iraq in the back of a truck. Channels private equity from the Gulf states into failing businesses in the West.

Nigel Doughty, 50

Doughty Hanson £170m

The chairman of Nottingham Forest FC made his fortune buying and selling food and nursing homes. Ploughed £32m of his own money into Forest.

Gordon Bonnyman, 62

Charterhouse Capital £160m

Considered one of the City's shrewdest deal makers. Avoids the limelight and did not pick up the award when his business was named private equity firm of the year in 2006.

Damon Buffini, 44

Permira, £150m

Bought up high-street names including New Look, Holmes Place and Little Chef. The council-house son of a US serviceman built his fortune after reading law at Cambridge.

Richard Sharp, 51

Ex-Goldman Sachs, £150m

He spent 22 years at the American bank, building a solid reputation for aggressive deal-making. Left after the aborted takeover bid of ITV.

Jon Moulton, 56

Alchemy, £145m

Says that a history of childhood illnesses, including TB, left him determined to prove himself in business. His firm hit the headlines in 2000 with a bid for Rover.

Jeremy Coller, 49

Coller £110m

Has been building up his own firm since 1990. Raised eyebrows two years ago by warning of "gross incompetence or downright dishonesty" in the City.

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