Now that KKR has obtained access to the books at Boots, the likelihood of a private equity takeover is very disturbing after the biggest private equity company PERMIRA took over the AA and Birds Eye leading to a loss of over 4000 jobs.
I am writing today to Alistair Darling, the Secretary of State at the DTI, asking that where healthy, well-managed companies like Boots are threatened, he should establish a Takeover Commission to assess whether such bids are in the public interest or not, and to block them if an independent commission judges they are not.
I am asking him to lay down the terms of reference of such a Commission, which should specify the range of conditions which would have to be met to ensure the wider public interest is safeguarded.
One of the conditions should be that a contractual statement should have to be provided by the private equity company about how its takeover would affect the employment, the pay and terms and conditions of existing staff for a specified period.
I am proposing to the Secretary of State that the company would be legally liable for implementing, and not reneging from, the commitments made in its prior statement to the Takeover Commission.
(This is from a DCH email, please forward to people who will sign the petition.) Defend Council Housing has posted a ‘Fourth Option’ for council housing E-Petition on the 10 Downing Street website.
The DCH petition calls on the Prime Minister to “provide the ‘Fourth Option’ of direct investment in council housing… bring all homes up to at least the government’s Decent Homes Standard by 2010 and also build a new generation of decent, affordable and secure council homes for rent”.
The ‘Fourth Option’ is supported by a broad coalition of organisations representing council tenants, the TUC and all major trade unions, councillors and MPs across all the main parties (see early day motion Funding Decent Council Housing).
The petition was launched as the well respected Parliamentary Public Accounts Committee joins in criticising government’s dogmatic obsession with private market solutions to the growing housing crisis.
The influential committee of MPs make clear that the significant amounts of public subsidy Ministers have poured into a never ending list of home ownership initiatives are neither value for money or making any contribution to tackling the growing housing crisis. The committee questions the effectiveness of the Communities & Local Government’s schemes for helping low income households to own their own home.
The MPs find that: the CLG does not know how the schemes affect local housing markets; it is “unclear” whether the assistance is helping to recruit and retain key workers; and housing waiting list controls are poor, meaning that three quarters of those gaining assistance have incomes above £25,000.
Defend Council Housing today welcomed the report from the Parliamentary Public Accounts Committee on ‘Low Cost Home Ownership Assistance’. Alan Walter, DCH chair, said:
“All the evidence shows that the quickest and most effective way of tackling growing housing need in 21st Century Britain would be for government to invest in improving existing and build a new generation of first class council (public) housing.
Ministers should drop their dogmatic insistence on privatisation and the private market. Subsidies for home ownership don’t create one extra home for those who need them – it just increases profits for lenders and developers and pushes more people into debt.
Pouring public subsidy into home ownership schemes only inflates house prices and doesn’t benefit those on low incomes.
Nearly 3 million council tenants want the ‘Fourth Option’ of direct investment in council housing and if local authorities were once again given the ability to build new council homes they could provide decent, affordable, secure and accountable housing for the 1.6 million households on council housing waiting lists.”
Read latest twelve page DCH newspaper (published March 24)
In yesterday’s Budget, Gordon Brown pre-empted the Tories by, in effect, doing their work for them – cutting corporation Tax and cutting the basic income tax rate. What he has not done is produce a real Labour Budget which would dramatically cut growing inequality by ending glaring tax loopholes that favour the rich. (E.g. non domicile tax status for the super rich and the taper relief exemption for private equity investors) while at the same time raising the basic State pension to pensioner credit level as of right for all pensioners and linking all future increases in the pension to earnings.
He has not tackled environmental issues adequately. His policy of bringing the airlines into the EU Emissions Trading Scheme in several years time will not deter the fastest rising cause of greenhouse gas emissions. Bringing in a carbon entitlement for individual households in 2012 is far too late. He has done nothing to increase the pathetically low level of electricity generation in UK from renewable sources of energy, still stuck at 4% when the rest of the EU level is 20-25%. Building standards and energy efficiency still remain disappointingly low and he has refused, wrongly, to earmark all green taxes for expenditure on better green alternatives (e.g. bus rail and smaller engine cars).
From
The recent cabinet agreement in Baghdad on the new draft oil law was hailed as a landmark deal bringing together the warring factions in the allocation of the country’s oil wealth. What was concealed was that this is being forced through by relentless pressure from the US and will sow the seeds of intense future conflict, with serious knock-on impacts on the world economy.
The draft law, now before the Iraqi parliament, sets up “production sharing partnerships” to allow the US and British oil majors to extract Iraqi oil for up to 30 years. While Iraq would retain legal ownership of its oil, companies like Exxon, Chevron, Shell and BP that invest in the infrastructure and refineries would get a large share of the profits.
No other Middle Eastern oil producer has ever offered such a hugely lucrative concession to the big oil companies, since Opec has always run its oil business through tightly-controlled state companies. Only Iraq in its present dire condition, dependent on US troops for the survival of the government, lacks the bargaining capacity to resist.
This is not a new plan. According to documents obtained from the US State Department by BBC Newsnight under the US Freedom of Information Act, the US oil industry plan drafted early in 2001 for takeover of the Iraqi oilfields (after the removal of Saddam) was pushed aside by a secret plan, drafted just before the invasion in 2003, calling for the sell-off of all of Iraq’s oilfields.
This secret plan was crafted by neo-conservatives intent on using Iraq’s oil to destroy the Opec cartel through massive increases in production above Opec quotas. However, Philip Carroll, the former CEO of Shell Oil USA, who took control of Iraq’s oil production for the US government a month after the invasion, stalled the sell-off scheme. As Ariel Cohen of the neo-conservative Heritage Foundation later told Newsnight, an opportunity had been missed to privatise Iraq’s oilfields.
Now the plan is being revisited, or as much of it as can be salvaged after the fading of American power on the battlefield made enforced sell-off impossible. This revision of the original plan has been drafted by BearingPoint, a US consultancy firm, at the request of the US government. Significantly, it was checked first with Big Oil and the IMF and is only now being presented to the Iraqi parliament. But if accepted by the Iraqis under intense pressure, it will lock the country into weakness and dependence for decades. The neo-cons may have lost the war, but they are still manipulating to win the most substantial chunk of the peace when and if it ever comes.
It isn’t difficult to see why. The super-giant oilfields of south-eastern Iraq, particularly the Majnoon and West Qurna, together with the East Baghdad field, are the largest concentration to be found anywhere in the world. Oil exploration costs are among the cheapest globally, with the current cost estimated at around 50c per barrel compared with the current retail price of about $60 a barrel. Petroleum geologists have discovered 73 major fields and identified some 239 as having a high degree of certainty. Yet only 30 fields have been partially developed and only 12 are actually on stream. Undrilled structures and undeveloped fields could represent the largest untapped hydrocarbon resource anywhere in the world. While most other Middle East countries are fully exploiting their reserves, large parts of Iraq are still virgin.
This prize is cast in even greater relief by recent assessments of the looming imminence of global peak oil production. The International Energy Agency now estimates that world production outside Opec has already peaked and that world production overall will peak between 2010 and 2020. Optimists who project large reserves remaining of over 1 trillion barrels base their figures on three illusory premises – inclusion of heavy oil and tar sands whose exploitation would entail colossal economic and environmental costs, exaggeration by Opec countries lobbying for higher production quotas within the cartel, or new drilling technologies which may accelerate production but are unlikely to expand reserves. In contrast, the pessimists are steadily gaining ground, and against this background Iraq remains potentially the last remaining major breakthrough.
Nevertheless, on every count the latest US plan to get control of Iraqi oil at almost any cost is profoundly misconceived. Even from the point of view of America’s own self-interest, its security is imperilled more by the failure to develop alternative energy options than by the lack of capabilities of its weapons systems. Yet the US government continues to spend about 20 times more R&D money on the latter problem than on the former. It is still the case that funding the import of oil represents about 40% of the current US trade deficit, yet no vigorous programme in renewable technologies is being supported.
As Senator Richard Lugar and James Woolsey, former director of the CIA, said prophetically in 1999 about growing US dependence on increasingly scarce Middle Eastern oil, “our losses may come suddenly through war, steadily through price increases, agonisingly through developing nation poverty, relentlessly through climate change – or through all of them”.
Secondly, in neo-conservative eyes Iraq was also required as an alternative to Saudi Arabia to provide a military base for the US to police the whole of Gulf oil. It was no longer possible for the US to maintain troops in Saudi Arabia for that purpose without risking the collapse of the dictatorial Saudi regime and its giant oil assets falling into the hands of Islamic extremists. The removal of US troops from Saudi Arabia was the principal demand contained in Osama bin Laden’s fatwa of 1996. This was why, shortly after invading Iraq, the US announced that it was pulling its combat troops out of Saudi Arabia, thereby meeting Bin Laden’s principal pre-9/11 political demand. But unfortunately for the US, al-Qaida is now seeking the removal of US troops from Iraq as well.
Above all, the policy is flawed by its extreme short-sightedness. Even if the US were to win its war in Iraq, which now looks virtually impossible, its incremental gain before the oil runs out would be short-term, while its exposure to intensified and unending insurgency because of perceived US seizure of Iraqi oil rights, especially if extended to Iran, would be disproportionately enormous both in the Middle East and maybe also at home. It is diametrically the opposite of the policy to which the whole world will be forced ineluctably by the accelerating onset of climate change. Perhaps the single greatest gain of the west learning this lesson of weaning itself off its oil addiction is that it would end this interference in the internal affairs of Muslim countries simply because they happen to have oil – the central cause of world conflict today.
I’m hoping to meet workers from the AA and NCP tonight, just before the adjournment debate I’ve been able to secure.
Private equity firms are now going after healthy, well-managed companies, looting them in the interests of huge personal gains for themselves at the expense of enormous job losses for employees and crippling the companies with debt.
Examples include AA – where within months of buying it the private equity owners Permira and CVC Capital had cut 3,400 jobs and reduced front-line services for motorists drastically. Birds Eye – where Permira pledged to keep workers’ employment terms for at least 3 years, then within 5 months closed a plant in Hull at the cost of 600 jobs.
Debenhams – where the private equity partners increased the firm’s debt from £100m to £1.9bn, paid themselves a dividend of £1.2bn, sold the freehold of the stores for £500m and leased them back, and then floated the business and took another £600m, thus making 3 ½ times their investment in a little over 2 years and leaving Debenhams with huge interest payments and rent on stores it once owned.
Private Equity is now lining up Sainsbury’s and Boots for the same treatment. As Roberto Italia, then of Warburg Pincus, now of Cinven private equity, has said: “Of course we’re out to shaft the companies we invest in.”
I want to see six major changes in Wednesday’s budget:
1 The taper relief loophole in capital gains tax for private equity firms should be immediately ended.
2 Tax incentives should be ‘staircased’ to encourage long-term investment of 10 years or more, and to discourage short-term in-and-out asset-stripping.
3 The restructuring of company pension schemes to increase personal gains for private equity partners should be blocked.
4 There should be much greater transparency required from private equity operations, in particular the requirement to provide full quarterly reports in the same way as publicly quoted companies.
5 The provision of tax relief for leveraged buy-outs should be ended.
6 Private equity firms should be required beforehand to provide a public interest statement of the expected and intended impacts of the takeover on jobs, debt, investment, and the longer term future of the target company, and this statement should be contractually binding for a stated period at least as far as employment is concerned.
The engine for this private equity plundering comes from three tax changes made in the last ten years. First, in 1998 the Government introduced ‘taper relief’ on capital gains, slashing capital gains tax for people owning shares in their own companies or in unlisted businesses from 40% to just 10%, provided they had owned the asset for 10 years. The real bonanza started in 2002 when the Government, amazingly, changed the rules again so that people only needed to own shares for 2 years to qualify for the hugely valuable 10% tax concession. Then when all companies with highly-paid employees started setting up elaborate ‘share-based’ pay schemes designed to disguise income as capital gains, the Government in 2003 changes the rules yet again to require that shares received as part of a pay package be declared as income. The private equity gravy train nearly ground to a halt. However, unaccountably, the Government then exempted private equity from the new rules. The gravy train rolls on as a special deal for private equity.
This loophole is costing the Treasury a fortune. From a mega-fund buy-out of £10bn such as is being put together for Sainsbury’s, the private equity partners might expect to walk away after a few years with perhaps £2.8bn. If that were taxed as income, the Government would get £1.1bn in tax. But taxed as a capital gain, the effective tax rate might be as low as 7.5%, or just £210m. The Treasury thus loses £900m. Official figures show that this loophole is costing the Treasury a fortune, with taper relief costing the Government £4.5bn this year, up from £550m in 1998.
This piece on the outcome and effects of last night’s vote appears on the New Statesman website, as does an article from a Trident supporter, Tom Watson MP.
Whatever the arguments over the wisdom of retaining nuclear weapons, he and I both seem to agree that the way in which the matter was handled within the PLP and indeed the Labour Party as a whole needs to change drastically if we are to see Labour regain electoral support.
Mr. Michael Meacher (Oldham, West and Royton) (Lab): One cannot but draw encouragement from the fact that when occupants of both Front Benches come together in agreement there must be a good deal to be said for the opposite argument. So it is today. Like others, I do not believe that the Government have adequately or convincingly answered certain fundamental questions about renewing Trident, in particular its true cost, why a decision has to be taken now, whom it is meant to deter, and how it is genuinely compatible with non-proliferation.
Nor has there been a real opportunity to obtain fuller answers, because the process of consultation has been unjustifiably squeezed. There is an unmistakable sense in this latest exercise that both Parliament and the electorate are being bounced into this decision. I still believe that there is a strong case for further and fuller consultation of the electorate before such a momentous decision—which will cost taxpayers some 6 per cent. of GDP—is made.
The argument against renewal of Trident is extremely strong—
Mr. Chris Mullin (Sunderland, South) (Lab): I think that my right hon. Friend meant 6 per cent. of the defence budget, not 6 per cent. of GDP. He may wish to amend the record.
Mr. Meacher: No, I am referring to a cost of £75 billion—I shall discuss that further in a moment—which is roughly 6 per cent. of GDP. It is substantially higher as a proportion of the defence budget.
BBC Online are running an poll on whether we need to build a new generation of submarines to carry Trident D5 missiles. Show your opposition to this premature and politically misguided proposal by voting in this poll.
So far, 4000+ people have voted, more than doubling the numbers of votes cast in a period of about two hours.
I think there are four key challenges now facing the EU. First, Europe’s economic problems cannot be solved with supply side reforms alone. Weak domestic demand in many cases, made worse by the constriction of the Stability and Growth Pact, should be tackled by setting up a counter cyclical European Recovery Fund and by developing ECOFIN as a real political counterpart to the European Central Bank.
Second, the EU’s response to the global economy should be smarter than simply posing a choice between liberalisation and protectionism. It should seek to stabilise exchange rates and prevent speculative capital flows from destabilising healthy economies through a Tobin tax. It should press for an international clearing union to smooth trade imbalances by requiring countries to recycle their surpluses to maintain global demand. And it should take the lead in benchmarking social and environmental standards into world trade rules.
Third, the EU should give its social model a more distinctive European form. To deal with collapsing corporate provision, it should set up a European social fund into which companies should contribute a proportion of their profits to meet at least some of the spending needed to guarantee security in retirement as well as providing at least minimum standards for a European childcare guarantee.
Fourth, it must democratise EU politics so as to enable Europeans to feel involved in a common political debate about their future. Maybe a new Preseident of the European Council should lead on Europe-wide elections so that electors voted more as Europeans.
We are quite right to aim at global leadership over climate change, but we will only get it if we earn it. And at present we’re not. We have been at great risk of covering up our failure to reach even modest targets by taking on ever more ambitious ones, while kicking them ever further into the future. At the EU Summit in Brussels on Saturday the heads of government did exactly that – ratcheting up the targets for 2020 while failing to deliver the lesser targets for 2010.
The EU is way off track to meet its 8% cut in CO2 emissions by 2010. In the UK emissions have risen in 6 of the last 7 years, when they should have fallen by 12%. Air travel and car emissions continue to rise sharply. The UK target for electricity generation from renewables was 10% by 2010. We are currently at 4% and will be lucky to reach 6%, when the average for the original EU 15 is nearly 20%. Higher targets are fine, but without serious enforcement the plaudits are vacuous.
The test for the Climate Change Bill on Tuesday is clear. Does it have an explicit strategy to deliver 60% cuts by 2050, as the scientists require? What exactly are the mechanisms proposed to deliver this? Are they all enforceable? Will the Government set binding annual targets to achieve the cuts required, monitor progress and publish the results and bring in whatever changes or new mechanisms are necessary to keep Britain on track? Anything less is a cosmetic palliative in the war on Climate Change.
The consultation on Trident has been a sham. By fixing a vote in the House of Commons for next Wednesday, No 10 is bouncing us into a momentous decision years before expert opinion says it is necessary.
As leader, I would re-open this decision. I would arrange a full and proper consultation lasting at least six months, embracing all the relevant options and making sure public opinion is properly heard, followed by at least a two day debate in Parliament, ending with a fresh and much more authoritative vote.
Getting agreement today to a binding 20% renewables target at the EU summit in Brussels is crucial. But the rhetoric has to be delivered. Britain already has a renewables target of 10% by 2010, but is failing to get anywhere near it.
While Germany, France, Italy and Spain generate 10-25% of their electricity from renewable sources of energy and Sweden and Denmark 25-35%, for Britain the figure is just 4%. This is pathetic, given that around Scotland and the North Sea, we have more wind power and wave and tidal power potential than any other country in Europe.
Kicking targets another decade into the future to conceal the failure to deliver in the shorter term is not good enough.
