The Conservatives are unlikely to oppose attempts to increase capital gains tax on private equity companies, one of the party’s leading cheerleaders for private equity has told The Times.

Mark Field, Tory MP for Cities of London and Westminster and secretary of the all-party group on private equity and venture capital, said he would be astonished if his party opposed moves by Gordon Brown to change the way carried interest is taxed. The apparent political consensus on the issue means the measure is much more likely to go through.

Mr Field’s comments come as the City watchdog stepped up its scrutiny of private equity yesterday prior to a series of hearings on the industry by the Treasury Select Committee, which are due to begin today.

The Financial Services Authority, which outlined seven risks posed by private equity, said it would deepen its inquiry into potential conflicts of interest around private equity firms.

Under new rules unveiled yesterday, UK banks will have exposures to private equity checked every six months, reflecting concerns about the risks of increased levels of leverage.

The FSA will also beef up its oversight of the “excessive leverage” used in buyouts and the effect too much debt could have on the overall financial stablility of markets.

The watchdog said: “We maintain a risk exists that leverage in individual transactions increases to excessive levels, making the financial viability of the underlying firms unsustainable,” adding that a default of a large private equity-backed company was “inevitable”. The FSA’s comments will add ammunition to the trade unions and some MPs, who have accused private equity companies of asset-stripping.

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