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Private equity under examination Private equity chiefs under fire
(about 10 hours later)
Private equity firms are set to come under scrutiny from MPs at the first of a series of hearings into the industry. Private equity firms have come under scrutiny from MPs at the first of a series of hearings into the industry.
The Treasury Select Committee is to investigate the sector, which has been criticised by unions over the effect of takeovers on jobs and pensions. The Treasury Select Committee, which is investigating the sector, accused the industry of not being transparent.
A number of well-known companies, including Alliance Boots, have recently been bought by private equity firms. Representatives from the British Venture Capital Association (BVCA) were involved in an exchange over the tax breaks given to private equity firms.
The private equity sector argues that it improves the performance of the companies it buys. But the sector argues that it improves the performance of the companies it buys and is good for the economy.
And Jeremy Hand, of the BVCA said that the tax regime had stimulated enterprise and entrepreneurship.
'Bland' details
Private equity has been criticised by unions over the effect of takeovers on jobs and pensions.
A number of well-known companies, including AA, Birds Eye and, recently, Alliance Boots, have recently been bought by private equity firms.
Unions have argued that private equity firms pay too little tax.
Last week the head of one UK private equity group, SVG's Nick Ferguson, said the claims may have some justification, when he admitted that some of those running and investing in private equity were paying tax at a lower level than cleaners.
Labour MP George Mudie, a member of the committee, said that such an admittance meant the Chancellor was "bound to do something about it".
He claimed that individuals with "money coming out of their ears" were using the system to reduce their tax payments.
And he complained that information supplied to the committee had been "bland".
The BVCA said that more than £80bn had been invested in about 29,500 firms since 1983.
It called on the government to ensure that capital and talented people were not drawn away from the UK.
'Force for good''Force for good'
The committee will take evidence from the TUC and the British Venture Capital Association (BVCA) on Tuesday in the first of a number of hearings into how the sector is regulated. TUC secretary Brendan Barber told the committee that an increase in scrutiny of the private equity industry was long overdue.
Unions have argued that private equity firms pay too little tax - an accusation which the head of one UK private equity group, SVG's Nick Ferguson, has said may have some justification. And he complained that workers at firms set to be taken over were treated "as the cheapest chips at the edge of the roulette table".
Unions also charge that the companies taken over by private equity suffer job cuts and worsening working conditions.Unions also charge that the companies taken over by private equity suffer job cuts and worsening working conditions.
But the private equity industry argues that its actions benefit the UK economy. The BVCA said it "welcomed the opportunity to put the case for private equity in Britain as being a force for good and a very strong contributor to the success of the financial services industry in the UK".
"We very much welcome this opportunity to put the case for private equity in Britain as being a force for good and a very strong contributor to the success of the financial services industry in the UK," said Wol Kolade, BVCA chairman.
On Monday, the Financial Services Authority (FSA) announced it would continue to investigate the growth of private equity-led takeovers.On Monday, the Financial Services Authority (FSA) announced it would continue to investigate the growth of private equity-led takeovers.
It said it would study issues such as excessive debt and market abuse, and also ask banks about their exposure to leveraged buyouts.It said it would study issues such as excessive debt and market abuse, and also ask banks about their exposure to leveraged buyouts.