Gordon Brown raised union hopes yesterday that the government might make tax changes affecting the private equity industry later this year by pledging to "make sure there is justice and equity in the treatment of tax arrangements in that area".
Amid a growing public debate over the rates of tax which companies and individuals involved in private equity should pay, Mr Brown said a government review established three months ago was designed to "find out what loopholes were being used and then to take action to deal with it".
The chancellor, at the GMB annual conference in Brighton, was responding to remarks earlier this week by Nicholas Ferguson, a leading figure in the private equity industry. He told the FT: "Any common sense person would say that a highly paid private equity executive paying less tax than a cleaning lady can't be right."
Treasury officials said last night that the chancellor had not expressly intended to signal a shift in government policy towards higher taxation of the sector.
However, it would be surprising if ministers did not begin to take note of the growing media criticism of the sector's tax treatment.
If the outcry continues, Gordon Brown's successor as chancellor could be forced to look seriously at the issue in this autumn's pre-Budget report.
"You may well see something significant emerging from this, given the way the media debate has been going recently," said one Labour MP last night.
Ahead of the PBR, two separate reviews have been launched by the government. One is examining personal tax rules which allow executives to enjoy tax rates as low as 10 per cent. The otheris into the tax treatment of equity-style debt instruments.
Paul Kenny, GMB general secretary, welcomed the Chancellor's comments, suggesting Mr Brown had adopted a new tone.
He said: "From what Gordon Brown told conference, the GMB concludes that the fat cats are losing the argument on tax and it was very noticeable that he did not leap to the defence of the industry which he has done before." The union has demanded the removal of tax advantages as well as the imposition of a windfall tax on private equity companies which they accuse of cutting jobs and destroying pension benefits.
But in his speech Mr Brown swept aside union complaints over government policies on public sector pay, private investment in hospitals and schools and nuclear weapons.
Mr Brown has insisted that public sector pay rises should be in line with the Treasury's inflation target of 2 per cent as measured by the consumer price index.
He said: "Everything that we have done over the last 10 years to keep inflation and interest rates low is the best protection against people seeing their standards of living fall and I will continue to pursue that policy."
