Treasury select committee tackles private equity debate

In the wake of the recent controversy over private equity, the UK Treasury’s Select Committee is to conduct an enquiry into the industry. Both sides of the argument are likely to find support.

The Treasury Select Committee leading the UK government’s enquiry into private equity funds includes an interesting mix of staunch industry supporters and likely trade union sympathisers.

The UK government said yesterday that its Treasury Select Committee would launch an enquiry into private equity funds, in the wake of a recent discussion paper by the Financial Services Authority, a regulatory body, and the formation of a BVCA-led working group under Sir David Walker that will look at ways to improve transparency and disclosure.

The Treasury gave little detail about how the enquiry would work, saying only: “Further information about the terms of reference and timing of this inquiry are expected to be included in a call for written evidence in due course.

However the committee, which includes MPs from all three leading parties, dominated by Labour, is expected to speak to leading figures from the private equity world and report back to the Treasury.

One of its members, Conservative MP Brooks Newmark, is also a senior adviser to buyout firm Apollo Management, where he was a principal from 1998. Newmark told PEO: “The private equity industry began as a cottage industry. Now it is buying bigger businesses with an impact on the economy and by definition a higher profile. It needs to recognise that. The BVCA’s working party to create a code of practice is a good idea.”

Newmark said there was a valid case for taking companies private, but the industry had been slow to react to the widespread criticism, spurred in the UK by GMB union.

Fellow Tory Michael Fallon is also well-acquainted with the industry – he remains a director of Just Learning, a nurseries business owned by buyout firm Alchemy Partners.

Of the other two Tory MPs on the committee, Peter Viggers, a former solicitor and banker, is chairman of trustees of Lloyd’s of London’s pension fund, while David Gauke was a City lawyer before being elected to parliament in 2005. Another member likely to be sympathetic to the industry is Liberal Democrat MP Colin Breed, who specialised in venture capital and corporate finance during his ten year investment banking career.

However, other MPs on the committee may be more likely to support the trade unions opposing the industry. In particular, Sally Keeble, Labour MP for Northampton North, used to be head of communications for the GMB union, which has been at the forefront of the recent attacks on private equity.

All the parties concerned have welcomed the enquiry. BVCA chief executive Peter Linthwaite said: “We look forward to submitting written evidence and to appearing before the Committee if required.”

The GMB also expressed support. General secretary Paul Kenny said: “GMB is calling on MPs to investigate the practises (sic) in the private equity business and to look carefully at the tax regimes involved. GMB if asked will submit detailed evidence that should cause MPs to take a very close look at how this industry operates in practise (sic). GMB hope that this investigation will make a positive contribution to the accountability and scrutiny of this industry.”