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The News Line: Feature GMB welcomes debate on private equity
GMB trade unionists and and supporters of the sacked Gate Gourmet workers from Heathrow demonstrated outside the venture capitalists’ summit held in Frankfurt, Germany on February 28th
THE GMB welcomes the House of Commons debate on private equity as the ‘barbarians’ target Boots.

Michael Meacher MP has secured a debate in the House of Commons on Monday 19th March

Paul Kenny GMB General Secretary responding said ‘GMB members have asked MPs to debate the tax breaks that they consider is the motor that drives this industry.

‘City commentators have said that the ‘super returns that private equity boasts of is merely a form of tax arbitrage’.

‘Since MPs are responsible for our tax system it is high time they debated Wall Street’s drive to Main Street and what lies behind it.

‘Debt used to lever buy outs should no longer be tax deductable.

‘This change can be made without impacting on deductability for borrowing for non-leverage ends. Also in the treatment of the fees and profit shares taken it is high time the private equity elite were thrown off the tax boat designed by Gordon Brown as an incentive for business start ups and entrepreneurialism - not for buying and selling existing companies.

‘It is now clear to GMB that Ed Balls statement last week has not adequately dealt with these issues
‘MPs need to debate the climate of total secrecy that prevails which covers up asset-stripping on a grand scale to the self aggrandisement of the elite.

‘In car parks for example almost £1 billion has been stripped from the sector over the past few years.

‘Since money does not grow on trees this has had to be paid for by job losses, wage cuts and sky-high car parking charges. MPs need to ask why GMB members employed by NCP in London are striking for union recognition while owner 3i plans to take out £245m after 18 months ownership.

‘MPs need to recognize that there is little empirical evidence of job creation in the larger buyouts and plenty of evidence of job losses and asset-stripping on a grand scale at Birds Eye, AA, Little Chef and many others.

‘MPs should not allow this truth to be obscured by job creation in start ups and new ventures which GMB has never sought to deny’

Michael Meacher MP added ‘Private equity firms are going after healthy, well managed companies with a large cash flow, often extracting huge personal gains at the expense of enormous job losses and crippling a firm with large debt.

‘We need to look closely at how they operate, focusing particularly on the tax relief that they receive for leveraged buy-outs and on the need for them to produce in each case a clear contractual statement of their impact on the public interest, including stakeholder and employee interests.’

This is the text of the letter sent to GMB members in Parliament on February 7th 2007

‘GMB is seeking help from our members of Parliament to secure action to rein in the activities of the venture capitalists. GMB is calling upon Gordon Brown in his next Budget, to end tax relief for interest payments on loans used by venture capitalists to buy companies like the Automobile Association, Birds Eye and Sainsburys.

‘This relief costs the Exchequer hundreds of millions per annum, while giving debt unfair tax advantages over equity. This transfer from taxpayers is now leading to the destruction of household name companies by venture capitalists, who are saddling these employers with massive debts.

‘This is no small matter, UK companies owned by venture capitalists employ 3 million people in Britain.
‘For example at the AA, since the venture capitalists took over in 2004, they have loaded the AA with debts of £1.9 billion.

‘This massive debt amounts to over six years of the subscription income from the AA's individual members.

‘It amounts to £300,000 per AA employee. This debt is backed up by virtually no assets, since nearly all buildings and fleet used by AA are leased. At AA the venture capitalists sacked 4,000 of the 10,000 staff, saving £100m per annum on resources devoted to dealing with 4 million breakdowns per year.

‘Not surprisingly services to AA customers have declined. AA response times have fallen from first to third in the Which rankings. As there are fewer patrol staff to deal with the same volume of breakdowns, each patrol is forced to work overtime, and has to attend a higher number of breakdowns per day.

‘The patrols are only able to provide a lower level or roadside service particularly to the 4 million individual AA members. More of them end up being towed to garages than was formerly the case.

‘Profits at AA have risen to £175 million, of which more than half is used to pay interest on the £1.9 billion loans. So rather than the Exchequer receiving tax on these profits the venture capitalists are able to claim millions in tax relief on the interest payments. Thus the taxpayer is subsidising the activities of the venture capitalists.

‘GMB opposes the unregulated and unaccountable activities of venture capitalists, their ability to get tax relief on loans, and the effect they have on companies, jobs, pensions and the economy.

‘GMB consider that the private status of the venture capitalists is an abuse of company law and abuse of the privilege of limited liability status. The growth in this industry is leading to increased merger and takeover activity thus generating huge bonuses for the City while the management team who run the industry levy very steep charges and commissions.

‘In effect it is a vehicle whereby the savings management sector is able to cream off large sums of money for their own self aggrandisement.

‘GMB is seeking an adjournment debate before the Budget to press this policy on the Chancellor.

‘The news that these same venture capitalists are circling Sainsburys makes this change of policy more urgent. GMB is asking all members of Parliament to submit a bid for an Adjournment Debate on the floor of the House of Commons, and request that you as an MP will also submit a call for that Debate.

The more support we receive, the higher the chance we get in securing this Debate.’







 
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