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Finance Bill

: I support the amendment moved by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), and echo some of the comments that have already been made by my hon. Friends about the importance of the private equity industry to the economy. I should—probably to the amusement of the Minister—declare another interest, in that I am the director of a venture capital trust that is quoted on the stock exchange. It is a very domestic business—in contrast to the issues that the Bill is trying to reach, which involve primarily offshore relationships. In this country we have the most effective and substantial private equity industry outside the United States, and each of the funds that raise capital in this country does so on a global basis, with which I am familiar, ranging from the United States to Japan, and including Canada and most of continental Europe. Most of those investments are structured through vehicles not designed primarily to evade tax at the underlying corporate investment level. They are efficient structures, designed to allow funds from around the world to come together and support investments made by the fund managers. We should not therefore try to introduce a level of complexity that would drive such transactions into more tortuous structures. Secondly, increasingly sophisticated measures are being introduced to support companies that have been taken private. I refer not only to mezzanine finance, as referred to by my hon. Friend the Member for Runnymede and Weybridge, but to high-technology companies, some of which are offered distribution agreements by other companies. Some of the insurance companies are involved in providing insurance products, so other financial arrangements may become involved within the transactions, and they might inadvertently get caught by the legislation. Many of the lenders may not necessarily be banks. In the case of mezzanine finance, for example, they are often banks provided with an equity kicker, which would be caught by the suggested arrangements, but some mezzanine finance is now provided by insurance companies without an equity kicker, through a loan-note structure with a high interest rate, which would not be caught by our amendment because there is not an equity relationship. The whole picture of private equity in this country is increasingly sophisticated, and by drawing the provisions as the Government have, I fear that they may impose unnecessary and undue burdens on our very successful investment management industry. For that reason, I support the amendment.