This video was re-posted by former Democrat Labour Secretary, Robert Reich yesterday:
Almost everything Robert Reich has to say applies in the UK as much as it does in the USA, including the ridiculous favourable tax treatment.
Labour said before the election that it will close this loophole, but of late there have been hints of backtracking on that, as is so commonplace with anything of worth that it said before reaching office. The lobbying on this issue is intensive.
The reality is that private equity is not the best of capitalism, as it would like to pretend. Back in the 1970s it was described as what it really is. The description commonly used then for those undertaking this activity was ‘asset strippers'. Nothing much has changed, except the scale of the activity. Despite that, asset stripping is what it still is.
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I prefer the term ‘daylight robbery’.
For that is what it is.
The tax issue is a disgrace. These thieves come in, destroy a company and then leave the community and the government to mop up the mess – and get reduced taxes on their theft?
For the politicians to then turn around and tell us they do not have enough tax revenue to help? Or means test it.
Asset stripping thievery like this should be taxed to the hilt if it were to be done properly or allowed at all.
Perhaps nothing else tells us just how hollow our democracy really is.
“Asset stripping thievery” would that be the same as the bribes (sorry gifts) Starmer and his ministers have been accepting in the name of hollowing out the country’s democracy?
Making life very difficult for private equity and asset management companies should be at the top of the to do list for any party in government who had any sense of morality, decency and fairness. Nothing indicates the moral bankruptcy of this government more than their enabling of these robber baron companies to plunder and lay waste.
My partner was made redundant on Thursday, from her job of nearly 6 years. A local clothing company allowed itself to be bought out by a large multinational.
This is the multinational in question
https://web.archive.org/web/20240921074405/https://www.thetimes.com/world/ireland-world/article/billionaire-rubins-move-518m-offshore-fk58gcdvg
I hope she finds another one.
@el Deco
Don’t ya just love BREXIT?
The UK (England) use to the the USA’s portal to the EU.
This has now shifted to Ireland being the USA’s portal to the EU.
Has Nigel Farage or Boris Johnson explained the BREXIT dividend to date? I cannot find a detailed explanation of this BREXIT dividend anywhere! LOL! LOL!
it’s where the rainbow ends. Just find that and you’ll be rich.
Passing legislation to change tax law requires a majority in parliament. Starmer/Reeves have that in spades.
Changing tax law to raise corporation tax rates & to tax capital gains more like income (& withdraw the exemptions, eg pension contribution reliefs for higher earners) all would RAISE the tax take.
Starmer/Reeves claim they need to fill a “black hole”.
In THEIR terms, changing tax law would help fill that “black hole”.
They CAN do it.
They NEED to do it.
They REFUSE to do it.
They choose instead to cut public spending & throttle the economy so they can change some made-up debt figures on a bodged up balance sheet.
As the song goes, “I can’t come to the church to marry you today, my wife (donors/owners) won’t let me”.
It’s utterly contemptible.
Agreed
The USA needs to rid itself of the “Carried Interest” loophole too!
Come 06 November 2024, I hope Kamilla Harris is politically strong enough to follow-through on Robert Reich’s suggestions with the help of Elizabeth Warren.
It should be illegal and banned – full stop. Alongside hedge funds. Econmoies used to function without these contrivances which are legal forms of theft.
Richard,
Was there not a time when the use of a target’s assets to finance a hostile bid was illegal in the UK? Reich wants it to be illegal in the US. Am I misremembering, is the effect of age creeping up on me?
I always thought so
But lawyers opened otherwise
And there is no effective company regulator in the UK and so on effect no real company law enforcement anyway.
Spellcheck : But lawyers ‘opened’ otherwise : Opined ?
Probably….
Thank you. I was not misremembering. I was sure it was not an acquisition technique that was either acceptable or allowed in my day. I am stunned. This appalling loophole must have happened in around the last twenty years; insidiously. It is an extraordinary loophole, allowing parasites to use the power and success of successful companies against them, to destroy them. How on earth can small companies survive such attacks? They can’t. It is appalling. There should be a campaign to stop it. I speculate it would stop most private equity asset strippers, dead in their tracks.
How on earth can a political and legal system allow such despicable activities to survive; unless the whole culture is corrupt?
There you have it in a nutshell: ineffective or non-existent regulation will facilitate “disaster capitalism”/”asset stripping”/outright blatant pillaging – call it what you will – and how better to facilitate it than to reduce/eliminate Government funding of the relevant state assets charged with regulation. In other words the State is just as complicit as the asset strippers. Cui bono? Oh, and that whirring noise is Adam Smith spinning in his grave as his preachings from the late 18th century are glibly misquoted before being ignored entirely.
Much to agree with
What Private Equity does is far more subtle and far more damaging than conventional asset stripping. In the old days, when companies were broken up and the parts sold off, there was an opportunity to rebuild, and sometimes even to oppose the process. Nowadays the trend is to ‘Glazer’(1) the purchase by loading it with unsustainable debt to pay massive bonuses and dividends, leaving it completely unviable. That’s what’s been done to our water industry, for example. The new way is more subtle, more difficult to identify, and almost impossible for other stakeholders to prevent.
1. Named after Glazer family’s take-over of Manchester United
Thatcher couldn’t see it even in its infancy. Hanson and White were knighted for their asset stripping acumen. And if I remember correctly a knighthood to a non-Brit required some jiggery pokery.
You cannot generalise about PE firms. Some do a genuinely good job – improving management and injecting new money.
One of my friends was recruited by a PE firm to manage and turnaround a manufacturing business. He built up both turnover and profit, and the business was sold on after about 8 years.
Please note, I am not justifying the tax position!
I think we can…
Exceptions do not prove rules