Last night the Chancellor of the Exchequer Gordon Brown said he was committed to maintaining the UK’s competitiveness, just hours after the Treasury Select Committee threatened tax changes which could hit buyouts.
In his annual speech to the City, London’s finance district, the Chancellor said he recognised its international success was critical to that of the UK’s overall.
He said he was committed to maintaining a competitive tax regime, and having cut the main rate of corporation tax to the lowest in the G8, he would provide greater certainty on tax matters when it was needed most.
He said the City’s success in the new world order was down to its people, calling them the UK’s “great natural resource”.
His words were welcomed by the industry, which fears that a hostile report from the Treasury Select Committee will have a negative influence on the Treasury’s Autumn review of private equity’s tax arrangements.
At yesterday’s evidence hearing Damon Buffini, Permira’s managing partner, said he would stay in the UK irrespective of the tax implications, while Dominic Murphy, a KKR partner in London who is domiciled in Ireland, said he and his firm would abide by the fiscal law of the land.
Philip Yea, however, warned the Committee that adverse tax changes could damage the UK and force 3i to increase its overseas investment. Privately the industry says tax changes, particularly to the treatment of capital gains, could encourage buyout executives to leave the country.
However, Brown made clear last night the importance of preserving the competitiveness of the City, saying: “The financial services sector in Britain, and the City of London at the centre of it, is a great example of a highly skilled, high value-added, talent-driven industry that shows how we can excel in a world of global competition.”
One buyout executive told PEO he thought the Chancellor’s comments suggested he might just tinker with capital gains tax taper relief and ignore the grandstanding of the Committee, which will probably recommend a clamp-down.
The rest of his speech focused on the importance of education in ensuring the country’s future success and he revealed Buffini’s role on a National Council for Educational Excellence – which plans to bring together leaders in business, higher education, and the voluntary sector, alongside school heads, teachers and parents.
Buffini will join Sir Terry Leahy, retailer Tesco’s chief executive, Sir John Rose, Rolls Royce’s chief executive, Richard Lambert, CBI chief, and Bob Wigley, a banker.