UK City Minister reassures PE(3)

Kitty Ussher, the pro-European UK Labour MP recently appointed as minister for the City of London, has reassured business leaders that the financial services sector – and private equity in particular – will not be subjected to knee-jerk taxation or regulation.

Kitty Ussher, the newly-appointed economic secretary to the UK Treasury, has used her first speech to the City of London to reassure business leaders that the government will not make knee-jerk policy changes to appease public opinion.

In a speech to business lobbying group London First, the new City Minister told her audience that the City and the government “must work together to consider in a sensible and measured way our response, if any, to changes in the public mood”.

Ussher related this point specifically to the tax treatment of the private equity industry, reiterating last week’s comments by new Chancellor Alistair Darling. She said: “Any changes to the tax system need to be properly considered and carefully thought through, in the context of what’s best for the economy overall, rather than a knee-jerk reaction.”

Her words may encourage those in the industry who believe that political pressure from trade unions, politicians and mainstream media will force the Prime Minister Gordon Brown to change the current tax system, which allows the industry to pay as little as 5 percent tax on some elements of its income.

In the speech, Ussher said the government was keen to work in partnership with the City. “Because let’s face it – our interests are essentially the same,” she suggested. “The financial services sector creates 8.5% of our GDP and employs 1.1 million people in London and across our regions and nations… [and it] has a hugely important wider role in underpinning, supporting and facilitating the rest of the UK’s economy.”

Gordon Brown’s new Business Council, which reportedly includes Permira head Damon Buffini, will facilitate this process, she said.

Her role was to be the City’s “ambassador to Government and within Europe”, she said, and to make sure the government made “no decisions that affect the UK financial services sector without the fullest possible consultation with business and the City.”

Ussher, an Oxford-educated Labour MP who was only elected two years ago, had previously worked as the chief economist for Britain in Europe, a lobby group that campaigned for the single European currency and tax harmonisation across the EU. As a result, her appointment as City Minister attracted some criticism from the opposition Conservative party, who suggested this made her ill-equipped to represent the interests of Britain’s financial services sector.