PRIVATE EQUITY THREATENS PENSION FUNDS – GMB ive evidence to MPs

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GMB protest outside a dinner to launch the Private Equity Foundation ‘charity’ last January
GMB protest outside a dinner to launch the Private Equity Foundation ‘charity’ last January

THE GMB general workers union yesterday called on parliament to halt ‘tax privileges’ to venture capitalists and establish the amount of unfunded pension liabilities ‘dumped by private equity’.

The union’s general secretary, Paul Kenny, gave oral evidence to the House of Commons Treasury Committee on ‘the private equity industry’.

The union had already submitted written evidence based on the experiences of GMB members working for companies that have been taken over by private equity firms.

The GMB is challenging ‘the “carried interest’’ performance pay loophole that allows the private equity owners to pay only 10 per cent tax on this income.’

Demanding the closure of ‘the unfair and unjustifiable loophole’, the union said: ‘if this performance-related pay is treated as income rather than Capital Gains, the Exchequer will benefit to the tune of about £4 billion.’

Next, says the GMB, it wants MPs to tackle ‘the practice of turning equity into debt when buying companies’.

This costs the Exchequer ‘vast sums of money’.

‘For example, when Boots is taken private the roughly £140 million Corporation Tax it pays will no longer be paid as the interest on the £8 billion borrowing to buy the company, but will be offset against tax.

‘At the AA for example the boss has admitted that the AA has not paid tax since 2004 when it bought the company.

‘The AA, that does all its business on the Queen’s highway, is getting a free ride and the rest of us are paying for the upkeep of these roads.’

GMB asks MPs to change the rules so that borrowing for ‘leveraged buyouts’ no longer qualifies for interest tax relief.

Britain must follow Denmark, which has already shut this tax loophole, the union said.

‘Thirdly, GMB asks MPs to establish how much unfunded liabilities there were in 75 insolvent pension funds with links to private equity.

‘In supplementary evidence GMB has supplied MPs with details of a total of 96 insolvent pension funds in the rescue schemes set up by the government that have direct links to private equity owners.

‘Fifty-eight of these insolvent pension funds are in the Financial Assistance Scheme (FAS) and 38 of these are under consideration by the Pensions Protection Fund (PPF).

‘GMB has examined all the information on the public record regarding all the 96 insolvent pension funds.

‘GMB was able to establish that 21 of these insolvent pension funds have unfunded liabilities of £1,994,268,000.

‘Due to the secrecy in which private equity operates GMB has not been able to establish any figures for the amounts of the unfunded liabilities of each of the other 75 insolvent pension funds.

‘The MPs must use their powers to establish the facts.’

In its evidence, the GMB raised ‘the track record of industrial relations problems and disputes arising out of private equity take-overs and the management techniques they use to drive up profit at the expense of GMB members.’

The union cited the example of the AA.

It said: ‘Leicester born Damon Buffini is the boss of venture capitalists Permira who own the AA.

‘He is reputed to be worth £200 million.

‘Since he and CVC took over the AA they have sacked one in three workers (down from 10,000 to 6,600), specifically targeting the disabled.

‘Call centre staff are subject to total surveillance in the workplace.

‘They have 234 seconds to deal with each caller and to sell them upgrades.

‘They face discipline if they do not meet targets,’ the GMB alleged.

‘Their pay has been cut,’ the union continued.

‘The number of patrol staff to help stranded motorists has fallen from 3,400 to 2,100 and their working day has been increased from eight hours to 11.75 hours through compulsory overtime. Night patrols have been withdrawn.

‘Not surprisingly, the AA has fallen in the Which rankings from first to third in terms of response times for broken down motorists.

‘In a taped message to all AA patrol staff in winter 2006 the AA Chief Executive, Tim Parker, admitted that the venture capitalist owners had sacked too many staff and did not have enough left to deal with the workload.

‘AA membership costs are up by 30 per cent for some motorists.

‘Profits have doubled to £200 million.

‘Debts loaded onto the AA balance sheet have swelled to £1.9 billion since the venture capitalists borrowed another £500 million to pay themselves a “special dividend’’.’

The GMB also submitted evidence about the takeover of Bird’s Eye in Hull to back its case.

‘Within months of an assurance from Unilever that the private equity takeover of Bird’s Eye would not end in job losses, Premira made a snap announcement to close the Bird’s Eye food factory in Hull in September 2007, with the loss of 600 jobs, and move production mainly to Bremerhaven in Germany.’

The union then dealt with the situation at Anglian Windows.

It said: ‘Over 300 GMB members who work for Anglian Windows in Norwich, which is owned by Alchemy Partners, are owed at the very least £400,000 following the company’s refusal to implement a wage settlement that dates back to January 2004.

‘Because of the calculation method for the workers’ pay it could be much more, depending on the amount of work going through the factory.

‘The workers, who earn around £10 per hour, have staged five days of strike action after patiently waiting for their money for more than three years.

‘The company still refuses to pay even though it is very profitable.’

The GMB also cited the case of NCP car parks in Enfield.

‘GMB members – who are mainly migrant workers, working as parking wardens at NCP on the Enfield Council contract – had to resort to strike action and a demonstration outside the London head office of owner 3i, in order to gain trade union recognition.’

This, said the GMB, was ‘despite holding almost 90 per cent of the workforce in membership, which should trigger automatic trade union recognition.’

The union added: ‘A series of private equity companies have stripped almost £1 billion out of the car parking sector in the last few years and car parking charges have gone through the roof.

‘NCP services, which is owned by 3i, is proposing to slash the bonus scheme of its low paid workforce in the Royal Borough of Kensington & Chelsea.

‘Parking attendants who only earn £6.29 per hour currently receive a bonus of £100.00 per month.

‘Without consultation or regard to TUPE regulations, the management at NCP have given notice that they are going to introduce a discretionary bonus.

‘Staff can earn a maximum of £250.00 per quarter but this is linked to performance, including the number of tickets issued!

‘Experience from the NCP Enfield contract shows that staff and motorists will be the losers, as parking attendants will put under severe pressure to issue more tickets to London’s motorists in order to make up their pay.’