The Guardian has noted that the back tracking on private equity has begun in the Treasury.

Gordon Brown said on Wednesday that:

Private equity will be dealt with in the PBR. I can assure you that we will do so.

Th[e] matter will be looked at in a few days and weeks and wherever there is a loophole that there should not be, we will take action. I may say that since 1997 we have closed a massive number of loopholes where they exist. Sometimes it is very difficult to do so because there are lawyers and accountants who are always trying to find loopholes. On this issue of private equity, I can assure you that we will do so.

Now the Treasury has said:

The [private equity] review was still under discussion and no decision had been taken. The prime minister's statement merely reinforced the government's conviction that tax abuses would be tackled.

and:

We don't believe he said that the private equity industry was abusing tax loopholes.

This almost beggars belief. I know the Treasury is full of market economists providing it with a massive bias towards market abuse that creates enormous tensions with HMRC, with whom they share the building, but to suggest private equity interest reliefs, its extensive use of offshore, manipulation of the domicile rule and the abusive nature of the agreement on the taxation of carried interests are not the exploitation of loopholes is just plain daft.

Everyone knows that private equity is exploiting loopholes. That debate is over. As such it's time the Treasury faced reality. Which means dropping some of the blinkers that an economist customarily uses to avoid doing so.