In the unlikely event that one of the City’s private equity executives took time out of doing multimillion pound deals to chat with their office cleaner, one of the few things they might have to talk about is how little tax each of them pays.
Indeed, Nicholas Ferguson, chairman of SVG Capital, recently said that his colleagues were ‘paying less tax than a cleaning lady’ in a comment hardly likely to boost morale among cleaning staff at the City’s buyout houses.
But while cleaning ladies’ limited contribution to the exchequer is due to the fact that they probably do not earn a great deal, the one thing that even the financially illiterate (or uninterested) know about private equity high-flyers is that they are positively raking in the cash - but still pay very little tax. Apparently it’s something to do with deducting interest from taxable profits….
As an example, take the report today by BBC business editor Robert Peston that Saga and the AA paid almost zero corporation tax at all since falling into the hands of private equity two and a half years ago.
Foul play cry left wing commentators such as the Guardian’s Polly Toynbee, adopting menacing tones about how ‘it’s time to face them down, call their bluff and regulate their unjust advantage’. The Treasury Select Committee showed signs of heeding Toynbee’s words when some private equity chiefs were hauled before it and received a pretty heavy grilling.
But will Gordon Brown follow suit and 'face them down'? With words such as ‘puritan’ and ‘self-disciplined’ often used to describe the new PM, you might think he would have little time for the extremely wealthy seemingly shirking their responsibility to contribute back to society.
However, Brown’s track record (and some would say achievement) with the City of London hardly suggests he is bracing himself for a dual with some of its most influential and highest-earning players.
When asked during his leadership campaign whether he would raise the top rate of income tax, he pointed out that the richest 10 per cent now paid 52 percent of income tax, up from 40 percent in 1997, implying that he thought they were already doing their bit. At the same time, Brown has hardly been wagging a socialist finger at the so-called non-doms (those with British passports who hold non-domicile status and so pay substantially less tax). As the Spectator’s Fraser Nelson points out, ‘This is hardly the policy of a traditional socialist’.
But if our new PM is to address issues of social justice and equality head on, he will at least need to offer an explanation of why the current system doesn’t need changing.
