Ed Balls, the UK Government’s City Minister and a key adviser to Chancellor Gordon Brown, has sought to play down the recent controversy over private equity, while encouraging the industry to improve its transparency.
In an interview with the Financial Times, Balls stopped short of criticising private equity firms, as some of his Labour Party colleagues have done, but said: “coming forward with proposals for greater transparency in the way they operate would be in the interests of their industry and the UK economy more generally.”
This would show on a case-by-case basis whether they were “boosting the long-term interests of the economy”, Balls said. However, this did not require an equivalent level of transparency to public companies, he added.
Overall, the minister seems to suggest that the innovation of the private equity sector is beneficial to the UK economy – and it will remain successful as long as this continues. “New companies with new ideas win in markets – and the good ones which don’t have good ideas fail. That’s the way an open and competitive economy works,” he said.
Balls also thinks it is wrong to criticise the industry as being short-termist. “When you look at the evidence, on average, private equity investors have longer term relations – they stick with firms longer – than your average pension fund or listed company.”
Balls’ view is significant because it is likely to be in line with that of Gordon Brown, who is widely expected to succeed Tony Blair as Prime Minister. Balls was Brown’s key economic adviser at the Treasury before being parachuted into a safe Labour seat at the last election, and is thought to retain a substantial degree of influence with the Chancellor.
Other Labour MPs have been less balanced in their views. Several of the candidates for Labour’s upcoming deputy leadership election, including Peter Hain and Jon Cruddas, have called into question the tax treatment of private equity and its record on job creation.