Michael Meacher MP

The stupendous gains accruing to Blackstones and its founder, Stephen Schwarzman, inspire a mixture of moral vituperation and ogling envy. Capitalism, however, notoriously has its self-correcting mechanisms, however brutal, and the stage looks set for a denouement.
Two factors are conspiring to bring this about. One is the sheer scale of private equity buyouts, £22 billion last year in the UK. They now employ a fifth of the private sector workforce. The other is the easy-credit environment that has fuelled the explosion, but now seems likely to crash.
Private equity, which began benignly as venture capital pumping investment into start-up businesses, has evolved into a different animal – going after healthy companies, restructuring them to yield huge gains for equity partners at the expense of job losses for employees and crippling the companies with debt.
One example has been the AA. Within months of buying it, the private equity owners Permira and CVC axed 3,400 jobs and reduced services.
The engine for private equity enrichment comes from three tax changes in the past ten years. In 1998 the Government introduced “taper relief” on capital gains, cutting capital gains tax for people owning shares in their own companies or unlisted businesses from 40 per cent to 10 per cent, if they had owned the asset for at least ten years.
The bonanza took off in 2002 when the Government changed the rules again so people needed to own shares only two years for the 10 per cent tax concession. When all companies with highly paid employees started elaborate “share-based” schemes to disguise income as capital gains to get the tax benefit, the Government in 2003 changed the rules to require that shares as part of pay be declared as income.
The private equity gravy train all but collapsed. However, unaccountably, the Government then exempted private equity from the new rules. Never have the super-rich been showered with such lucrative partiality by any Government.
I want to see six changes. First, the taper relief loophole in capital gains tax for private equity should be abolished.
Second, tax incentives should be “staircased” to encourage investment of ten years or more, and discourage asset-stripping.
Third, looting of company pension schemes to increase gains for private equity partners should be blocked.
Fourth, tax relief for leveraged buyouts should end.
Greater transparency is needed from private equity, in particular quarterly reports.
A final key reform is that private equity be required to state expected and intended impacts of a takeover on jobs, debt, investment, and the future of the target company.

How far is this attack on civil liberties going to go? It is still proposed, in the current consultation before new anti-terrorism legislation in the autumn, to keep open the option of extending the 28-day limit on detention without charge to 90 days, even though there is no evidence of a single case where the police wished to detain suspects beyond the pre-charge detention period already permitted. And behind this latest proposal lies a long list of previous draconian measures.
Already under the special advocate procedure foreign nationals suspected of terrorist offences are not even allowed to be told what is alleged against them so that they have a chance to refute it. Information obtained under torture is now admissible in the special tribunals created to legitimise the holding of foreign nationals. When the judges declared that these procedures discriminated against foreigners, the government responded by widening their powers so that British citizens can also be tried by specially appointed courts staffed by judges and lawyers “vetted” and approved by the government.
Now, to preserve the precedent set by Belmarsh high security prison and by control orders in the community, it is proposed to opt out altogether from the right against arbitrary detention contained in article 5 of the convention on human rights. Britain is the only country in Europe to do this.

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Why is the Government so frightened of the Charter of Fundamental Rights as part of a new constitution or reformed treaty being negotiated today? In 2004 the Government had already secured that any right to collective action or extension of employment rights was, in accordance with Art. 28, “in accordance with national laws and practices”. With that proviso formally included (although now in the current further text Art. 88), why the panic about demanding a red line to stop fundamental rights, which every other country in the EU 27 signs up to, being incorporated in EU law and being applied in Britain?
But why indeed is the Government still so utterly determined, even to the point of vetoing this whole new treaty, to prevent the right to strike action becoming part of UK law? The Government’s answer of course is that labour market “flexibilities” (i.e. Thatcherite labour laws) have to be preserved at all costs as the foundation of the UK’s economic success over the last decade. But in fact Norway and Sweden, for example, have performed economically far better than the UK over the last decade, without any of these labour market flexibilities, and with social policy outcomes hugely superior to Britain’s on ever count.