Link to this page: https://www.socialistparty.org.uk/issue/490/2488
The Socialist 7 June 2007 |
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The fat cat and the 'cleaning lady'
NICHOLAS FERGUSON is chairman of SVC Capital, the firm that built Europe's biggest private equity fund, "almost from scratch". In a Financial Times interview, Ferguson criticised the fact that top executives involved in highly profitable debt-financed corporate buy-outs "pay less tax than a cleaning lady."
Private equity partners earn most money from, typically, a 20% share of any profit from selling companies. "Taper relief" rules allow the tax paid on this income to be as low as 10% provided that the private equity firm holds the company for two years.
"Any common sense person would say that a highly paid private equity executive paying less tax than a cleaning lady or other low-paid workers, that can't be right," Ferguson commented. Very 'common sense' of you, Fergie.
Workers might not agree with his solution, however. He says any proposals must not affect private equity's 'vital' role in the economy. He wants the profitable schemes without the unpopular bits.
But private equity companies operate purely to bring short-term profits and frequently practise asset-stripping, job destruction and wage-cutting. What bits of private equity corporations are 'popular', except with fat cats?
The firms also go in for pension fund dismantling (the GMB union says nearly 100 pension funds have collapsed after a private equity firm's takeover and temporary liquidation of the targeted company). The state then may take responsibility for the pensions but the private equity fat cats pay next to no tax to the government!
Ferguson wants to change only the tax rate and that marginally. We would say that the private equity conglomerates should be nationalised with compensation only on the basis of real need. For socialists, it's just common sense.