In a speech today to the Social Market Foundation, a UK think tank, Ed Miliband set out five reforms he said were necessary to help build a “new economy”.
“We need to re-found the relationship between finance and the real economy”, he said. “In the new economy we need to see a finance sector, the success of which isn’t measured simply by short term profits made and taxes paid, but by whether those profits are sustained by fulfilling its role as the beating heart of the economy. Getting finance to the right businesses at the right time, and so providing returns for savers and pensioners; standing behind, not turning away from, companies taking a long term approach to wealth creation,” he added.
Those within the private equity industry would argue that some of these concepts – sustainable long-term profits; financing businesses at the right time; providing returns to pensioners; a long term approach to wealth creation – are perfectly suited to the private equity model.
Nonetheless, the Leader of the Opposition appeared to suggest – albeit in more oblique terms than those used in his conference speech – that he continues to see private capital providers as the villains of the piece.
“We need to recognise that beyond the banks, it doesn’t make economic sense to allow large concentrations of unaccountable private power which do not work in the interests of the country. The old view that we should let predatory behaviour continue unchecked has let down our country and business. Vested interests, predators that do long term damage, are bad for our business and our economy. They raise prices, exploit consumers, and lead to inefficiency. Government has a responsibility, on hard-headed economic grounds, to use its power to break up vested interests. This will sometimes require regulation, sometimes require the strengthening of markets,” he warned.
Similar sentiments expressed in his conference speech were dismissed shortly afterwards by one London-based lawyer as “empty threats”. However, his apparent conflation of the industry with “predatory behaviour” shows that certain elements of the political class remain unconvinced of private equity’s role in driving growth and wealth creation.