The row about private equity is mostly the Labour party arguing with itself

The current row about private equity seems to me to have much more to do with the flexing of union muscles in anticipation of a return to influence under Gordon Brown than it has to do with efficiency and fairness in the use of capital. The GMB union has taken the lead, publicising its claim that private-equity takeovers are fundamentally evil by staging stunts to embarrass Damon Buffini, Britain’s leading black businessman and the head of Permira, the firm that bought up Homebase, Bird’s Eye, New Look and the AA. On one occasion the union paraded a camel (and presumably the eye of a needle) outside the church where Buffini worships, to remind him how difficult it is for a rich man to enter the Kingdom of Heaven.

This reminds us that the unions’ hostility is largely provoked by envy of City pay — plus suspicion of the fact that some private-equity millionaires, including Brown’s friend Sir Ronald Cohen, are also Labour party donors. But in public debate their case is couched in terms of job losses, ‘asset-stripping’, ‘lack of accountability’ and allegedly unfair tax advantages. Will Hutton in the Guardian, in their support, accuses private equity of ‘carrying short-termism to new extremes’ and undermining the concept of a public limited company as a joint enterprise in which public scrutiny helps managers make better decisions.

Well, it is indeed a surprising mutation of capitalism that so many familiar companies have been taken out of the stock market — Sainsbury’s could be next — and that one fifth of private-sector workers are now ultimately employed by private-equity owners. But it is hogwash to argue that this is generally a bad thing. Private takeovers are not, in practice, likely to be any more brutal than public ones — and in both cases the business taken over usually has a better chance of surviving and prospering after it has been through the pain of rationalisation.