Select Committee on Treasury Written Evidence

Supplementary memorandum submitted by SVG Captial

  Many thanks for your letter of 14 June 2007. You asked me to clarify my comment to the Financial Times concerning tax on carried interest, and to comment on Peter Linthwaite's comments on the BBC.

  1.  My specific comment to the Financial Times journalist which referred to the tax rate on carried interest was accurately quoted inside the FT on 4 June 2007. What was not made clear was that:

    a.  They were my personal views, and did not reflect the views of either SVG Capital plc, which I chair; its fund management business, SVG Advisers; or of the Private Equity investor Group, which I co-ordinate (see paragraph 4 below);

    b.  It was very important to have a careful approach to this question, to ensure the continuation of the encouragement to enterprise in the UK, which has been so successful over the last 10 years; and to maintain the competitiveness of the UK's financial services sector. Hence, my comment that it was important not to throw the baby out with the bath water.

  I am disappointed that my personal comment on carried interest taxation has received disproportionate attention and has distracted from the wider debate concerning the many merits of private equity to the UK economy.

  2.1  cannot comment on Peter Linthwaite's remarks on the BBC as I did not hear them.

  3.  My comment to the Financial Times was made in a long interview which covered much more than appeared in the article. In particular I had pointed out:

    —  The millions of people whose savings benefit from the private equity industry. As one example, in the last fund in which SVG Capital invested, the investors included pension funds investing on behalf of 33 million people, as well as 4O charities and endowments, and 20 Life Insurance companies, with all of their numerous beneficiaries.

    —  The great majority of the gains from private equity investment have gone to these millions of savers, through higher aggregate returns than provided by the stock market. Private equity now forms an important part of the portfolios of leading long-term savings institutions, including pension funds and endowments.

    —  These benefits have come primarily and positively through increasing the sales, productivity and earnings of the companies in which private equity funds have been invested.

    —  The unions views on private equity seem to pay no attention to these benefits. The interests of so many savers, so important in this time of concern about pensions and long term savings, are not served well by this.

  4.  I co-ordinate the Private Equity Investors Group (Hermes, 3i, The Wellcome Trust, Standard Life and SVG Capital).

  Together we have £20 billion committed to private equity investment, on behalf of our investors who include UK pension fund beneficiaries, individual pension savings, insurance company beneficiaries and many charities and endowments. The members of this group have seen this letter and the comments in paragraph 3 are made on their behalf.

July 2007

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