I was hoping that it wouldn’t happen, but my worst fears were confirmed when prime minister Gordon Brown told the Labour Party conference in Bournemouth that the taxation of the private equity industry ‘would be dealt with’ in the upcoming pre-Budget report
Despite statistic after statistic showing that private equity investment
generates growth, creates jobs and attracts foreign investment, the government
seems determined to crack down on the industry, despite its success.
Brown and the Treasury would not detail what ‘dealing with private equity’
would entail (we will have to wait for the PBR for that pleasure), but I’d bet
that the interest relief on debt and taper relief on investment, the foundation
of private equity’s outstanding success, are almost certainly on the chopping
block.
Private equity has taken a public relations hammering this year. Unions have
successfully painted the industry as one fuelled by greed and selfishness, while
the Treasury select committee seized the opportunity to bash bosses called in to
give testimony.
I was optimistic that after the political circus had left town common sense
would return Once the media frenzy had subsided we started to hear far more
sensible rhetoric from the Treasury, which started talking about a measured
approach and careful policymaking rather than a business bloodletting.
Brown’s comments and the language he used (he is going to ‘deal’ with the
industry and ‘take action’ on ‘loopholes’) suggests that a measured approach has
gone out the window.
It will be fascinating to see what the government comes up with come PBR
time. I hope I am wrong, but something tells me the goose will be slain and the
golden egg chucked out the financial services window.
Nicholas Neveling is a reporter on Accountancy Age