UK - Treasury report inconclusive

The Treasury Committee published its report on the private equity industry today, labelling it an 'interim' report and announcing it is to continue hearings in the autumn. The press release opens by stating 'key questions regarding the impact of larger private equity firms remain unanswered,' yet believes that the inquiry has 'made possible a more informed public debate than would otherwise have been the case.' This statement is true if parading mug-shots of private equity bosses at Glastonbury and rating the most 'villainous' qualifies as informed. The report is not the complete ill-informed disaster that some of the questions during the three hearings suggested it would be. The research is fairly comprehensive but although it attempts to address many areas of concern it is critically flawed due to its limited understanding of the industry. These limits are most obviously exposed in its conclusions and recommendations, where the first point avoids concluding or recommending anything. It refers to pension fund financing following a buyout and vows to 'return to this matter when we resume our inquiry.' The second point is a fairly rambling attempt at a nuanced view of the operation of the economy, observing that 'there are benefits and potential problems associated both with private equity and public equity, different forms of ownership may be appropriate for a company at different times in its history....and the central issue is how effectively the company is managed.' The point concludes in a similar vein to the first - that is, it concludes nothing and decides 'the issues need further investigation.' On tax, the report is slightly more authoritative, calling for a fuller explanation from HM Revenue and Customs as to the exercise of the Memorandum of Understanding, an agreement between government and the industry regarding the tax treatment of carried interest. On transparency issues, the report parrots almost to the word the recommendations of the Walker report. It is difficult to see what can be gained from extending the inquiry into the autumn and no doubt beyond. Hours of questioning and months of research have produced little of value and it is wishful thinking on the part of the committee to believe a longer inquiry will enable them to better understand the issues and recommend solutions. Extending the inquiry threatens to propel private equity back on to the front pages which, as we have seen, is not the route to reasoned debate. By Nathan Williams