Miliband launches fresh attack on private equity

John Bakie
27 September 2011

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The private equity industry has once again come under fire from Britainтs politicians, accused of asset stripping by Labour leader Ed Miliband.

Setting out his policies on business taxation and regulation today at the Labour Party Conference in Liverpool, Miliband put private equity in the firing line of his controversial ideas.

He has called for an end to the current regime where businesses are taxed and regulated equally, saying they should instead be constrained by the way they make their money.

The Labour leader proposes higher taxation and stricter regulations for those private equity firms deemed to be "asset strippers", highlighting the recent case of Southern Cross as the sort of business practices his party would look to discourage.

Care home chain Southern Cross is currently being wound down after it struggled to meet rising rents, having sold-off its property portfolio following its acquisition by Blackstone. The firm had been the biggest care-home provider in the UK.

However, the business community is likely to criticise attempts by politicians to define what makes a business good or bad. The private equity industry is also likely to highlight the many struggling businesses which have been successfully turned around by private equity funds.

This is not the first time Britain's Labour Party has criticised the industry. During Tony Blair's premiership, the issue of asset stripping and taxation in relation to private equity investors was a hot topic. The government eventually reformed capital gains tax, increasing the tax rate payable on most carried interest to 18% from 10%.