HOWZAT

The others giving evidence today were David Blitzer, senior managing partner in Blackstone, and Philip Yea, chief executive of 3i.

Earlier in the evidence session, however, the industry came under attack from trades unions, who claimed the companies brought uncertainty to staff of the companies they take over, and a lack of accountability. Private equity firms have typically shied away from public attention, do not publish accounts nor give any details behind the workings of their deals.

Their accounting is often offshore, for tax purposes, and, unlike public companies, there is no public record of what senior partners earn.

Jack Dromey, deputy general secretary of the Transport and General Workers Union (TGWU) and Labour Party treasurer, said the tax breaks were being misused.

They were originally introduced by Gordon Brown in his 1998 Budget, and were aimed at rewarding small businesses by allowing them to keep 90 per cent of the capital gains on their assets after only two years. However, the system is widely believed to be being used by the private equity industry, which was not its intention.

"What the Government did was in a different time and for different reasons," Mr Dromey said, adding that some private equity companies have "assets which eclipse the GDP of some small African states".

Answering a question by Labour MP Sion Simon, a member of the committee, as to whether he was guilty of modern-day class warfare by punishing people for being successful, he said: "7,000 job losses were announced yesterday at Cadbury's. The chief executive said today that that was driven by trying to fight off a private equity takeover.

"No-one is safe. We are sticking up for our members. You should stick up for your constituents."

Earlier, at Prime Minister's Questions, Sir Menzies Campbell had told Mr Blair that the system needed a complete overhaul.

"We are giving a tax break of £6 billion per year to some of the wealthiest people in the United Kingdom," he said. "Would it not be much more fair to give tax cuts to lower and middle income families who have suffered most under this Government? Wouldn’t that be an illustration of governing for the many and not the few?"

Mr Blair retorted: "I know the Liberal Democrats like to say: 'Here is this great pot of gold that is waiting there to redistribute to the families of the country’.

"It is just nonsense incidentally. However there are real issues here that have been raised and they have been raised incidentally right across the political spectrum.

“They have been raised actually by sensible people within the private equity field itself.

“The serious way of approaching this is to examine these claims, to examine them carefully and to look at in the Pre-Budget Report and that is what, very sensibly, the Chancellor is doing."

However, acknowledging that the matter did cause public concern, he added: "I think it is important to distinguish that particular question which I think is perfectly legitimate to raise, with condemning all the work that private equity companies do - because I don’t think that would be right at all."