Wednesday, March 25, 2015

On Taxing "Carried Interest" of Private Equity Fund Managers

A constituent asks me as PPC what I think of the 38 degree campaign to apply tax to the earnings of Private Equity Fund Managers. My reply:

Dear xxx

Many thanks to drawing my attention to this issue. You are the second to have done so, and I am fully in agreement with you on this.

It is scandalous that this handful of highly paid Private Equity Fund Managers should engineer things so as to deprive the Exchequer and the nation of up to £700 million pa in tax revenues foregone.

That HMRC should have colluded in creating a sweetheart deal to enable them to avoid taxation on their carried interest, a proportion of their funds profits, is a tribute to the effectiveness of the lobbying and political donation system that allows private equity fund managers to consititute one sixth of the donors to the Conservative Party, and the second largest donor to Labour's "Progress" faction.

I would argue that the lobbying and political donor regime that prevails in Westminster is a form of corruption, wherein the beneficiary that uses office (or potential office) for gain is not an individual in this case, but a political party.

Democracy means that politicians and parties are given power by the people in order to serve the interests of the people and the people alone. Political donations and lobbying corrupt this status, and causes politicians to seek to serve the interests of the rich individuals and companies with whom they are doing deals.

I note with unease that Private Equity Funds now hold some 5% of UK companies, particularly water, mental health and social service providers. I note that mental health services are currently underfunded, so that the PE funds stand to gain from any top-up that future Governments may direct towards mental health services.

I am glad to note that the US, Sweden, Netherlands and France have all made moves to treat carried equity as normal income, though all have failed up to now - a tribute to the power and influence of these fund managers. That they can cling so doggedly to their inflated incomes, despite the fact that they are earning up to £15million a year suggests very strongly that there is a process of addiction at work here - that a person in these ranks of the financial market is as dependent on ever increasing income as a heroin addict is dependent on his or her daily injection of heroin.

As to the solution to this anomaly, I fully endorse your proposed amdnedment to the Finance Bill 2015, and if elected, I certainly will actively back that amendment.

Sadly, the reality of the situation is that the result in Weston constituency is a foregone conclusion: Con hold. Ukip will somewhat reduce the total size of the John Penrose's vote, but the fact is that none of the non-Tory candidates stand a chance of replacing him.  The LibDems were the challengers in past elections, but they are now a shadow of their former selves, thanks to their flirtation with the Conservatives. The vote in Weston is a glorified opinion poll, and all non-Tory votes are wasted in the sense that they have no representation in Parliament. This is the ugly truth of First Past the Post. Of course, all the other candidates will contradict me, the three also-rans will assert that against all reality, they are able to win, and John Penrose will deny that he is a dead cert so as not to look complacent, but the electoral reality is as I have written.

Therefore the important answer to your email is the one from John Penrose, and I would be grateful to have sight of the arguments he puts forward to defend the status quo.

Thank you again for getting in touch.

Richard Lawson
Green PPC for Weston super Mare constituency

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