"Pottsamoney" put on the spot
SOCIALIST PARTY deputy general secretary HANNAH SELL was on the Jeremy Vine show on BBC radio last week, debating the infamous 'private equity' schemes with Hank Potts, equity strategist at Barclays Private Clients.
Hank Potts (aka Pottsamoney) said we live in a global economy and companies have got to be 'lean and mean' to survive under capitalism. Any attempts to regulate them would reduce the 'flexibility' they need to 'radically reform' the companies. It was just the survival of the fittest, he claimed.
Hannah said that modern capitalism is a race to the bottom where workers get pushed out while a few at the top make massive amounts of money. Cadbury's are cutting 7,500 jobs just because they are worried about being taken over by private equity companies. For workers, private equity is being used as a way of cutting jobs.
Private equity firms borrow money at low rates but then dump these debts on the target company which they then often sell on.
It makes huge profits but it does not make companies healthier, let alone Britain's economy because, like many capitalists, they pay next to nothing in tax.
Last year the 54 billionaires in Britain only paid 0.1% of their income in tax!
When Jeremy Vine asked Potts whether he'd be worried if a private equity outfit wanted to take over Barclays, the 'equity strategist' said he couldn't comment!
But he did claim that private equity firms had invested lots of money to make companies attractive to buyers, with 'great growth prospects'.
Hannah replied that capitalist companies are only interested in profit, and that is especially true of private equity firms that make profits out of a short turnover. They have no interest in the company's long-term future, just in selling it on. All this is opening people's eyes to how a tiny elite are making vast amounts of money.
What is private equity
IN BRITAIN, around three million workers are employed by companies controlled by private equity. Private equity bosses have recently become notorious for using cash and borrowed funds to take over companies.
They then cut costs by asset-stripping the firms, sacking workers, attacking wages and conditions and using tax loopholes (introduced by Brown) to make themselves rich.
Nearly half of the firms in the FTSE 350 taken over since 2005 went to private equity firms. These deals are often funded by huge levels of borrowings to take advantage of low interest rates. The debt used to finance the deal - plus massive management fees - is dumped on the target company.
Partners in private equity firms profit most from selling companies. "Taper relief" rules allow top executives and shareholders to pay as little as 5% or 10% tax on this income (down from a possible 40%) provided that the private equity firm holds the company for two years. The qualifying period used to be ten years but Gordon Brown reduced it to two!
Even many low-waged workers pay much higher rates of income tax than these bosses. The GMB union calculates that abolishing this loophole for greedy private equity executives would bring £4 billion more tax in every year.
The 'standards' man
LAST WEEK Gordon Brown appointed multi-millionaire private equity boss Damon Buffini, who heads the Permira group (they bought out the Automobile Association and Travelodge hotels), to a new body that will oversee education standards.
On the same day Buffini was in parliament at the Treasury Select Committee defending his fellow private equity firms from allegations of 'excessive profiteering', asset-stripping and tax avoidance. So what educational 'standards' will Mr Buffini be promoting in schools?
Will he recommend teaching pupils that making fortunes at the cost of people's jobs is good? Permira took over the AA in 2004, cutting the workforce from 10,000 to 6,700, cutting wages and extending the working day in its call centres. Will he recommend tax avoidance? The AA has paid no tax since Permira took it over.
Brown's decision to have a wealthy businessman as education standards adviser has more to do with keeping in with the rich than with education. Many private equity capitalists have given money to New Labour - Ronald Cohen of Apax ran Brown's election campaign. The big question might be: who's looking after your standards, Mr Brown?
Welcome to tax haven UK
BRITAIN IS a tax haven for the wealthy. Many rich business people take out 'non-domiciled status.' If you can prove some family or business link in a foreign country, however obscure, you are effectively free of UK tax on non-UK income.
This and other scams such as offshore investments mean that many of Britain's wealthiest people pay little or no tax. Treasury figures show that, for the year 2004-5, only 65 people had filed returns declaring a taxable income of £10 million or more.
The Sunday Times Rich List, however, shows that 350 British-based people have at least £200 million wealth, making them likely to 'earn' at least £10 million through dividends, interest or rent. But 85% of these super-rich paid no tax.
The lost revenue from these tax dodgers could be £6.5 billion.
Phone our national office on 020 8988 8777
Locate your nearest Socialist Party branch Text your name and postcode to 07761 818 206
Regional Socialist Party organisers:
Eastern: 0798 202 1969
East Mids: 0773 797 8057
London: 020 8988 8786
North East: 0191 421 6230
North West 07769 611 320
South East: 020 8988 8777
South West: 07759 796 478
Southern: 07833 681910
Wales: 07935 391 947
West Mids: 02476 555 620
Yorkshire: 0114 264 6551