London BriefingLess than a week into Gordon Brown's premiership any hopes the trade unions had that Britain's new prime minister might heed their calls to clamp down on the rampant private equity industry already look like they have been dashed.

In one of his first announcements as PM Brown has brought together a group of leading business figures to advise him on all business-related issues, including the "long-term productivity and competitiveness of the economy."

The Business Council for Britain, to be headed by Standard Chartered Bank chairman Mervyn Davies, is a collection of high-powered business leaders, including GlaxoSmithKline chief executive Jean Pierre Garnier, the new BP chief executive Tony Hayward, Sir Terry Leahy of Tesco, Stuart Rose of Marks & Spencer, Arun Sarin of Vodafone and Virgin's Sir Richard Branson.

Perhaps reflecting Brown's decision to employ fewer women in his cabinet, the new council has only one female representative - Pearson chief executive Dame Marjorie Scardino.

But the most controversial figure to be included in the inner circle is Damon Buffini, managing partner of the private equity firm Permira - and Number One hate figure for the trade unions.

In what looks like a seal of approval for the private equity sector, Buffini's top-level appointment comes at a time when the notoriously secretive private equity industry is facing unprecedented public scrutiny.

It was the takeover of the AA by private equity firms Permira and CVC three years ago which sparked the current debate.

As many as 2,800 workers lost their job following the deal and many customers have also complained about reduced service.

A BBC investigation into the finance and travel firm Saga and the AA revealed earlier this week that in their 2½ years under private equity ownership they paid virtually nothing in corporation tax.

Indeed, accounts for the AA showed that it ended 2006 in tax credit, with the Revenue actually owing it almost £12 million.

Meanwhile, the two companies, which are merging in a £6 billion-plus deal, have generated gains of as much as £2.5 billion for their private equity owners - Permira, CVC and Chartehouse - over the same period.

Some of this will be recouped in capital gains tax payable on the £2.5 billion profit made by the private equity owners, but many of them do not pay tax in the UK.

Leading figures in the private equity industry were subjected to fierce questioning from MPs last month, and again yesterday.

Their inquisitors cited recent comments from Nicholas Ferguson, one of the industry's leading figures, who questioned whether it was right that private equity partners paid less tax than their cleaning ladies.

The wealthy private equity partners have been particularly coy in revealing to MPs how many of them are domiciled in the UK for tax purposes, although at yesterday's Treasury Select Committee interrogation Peter Taylor, of Duke Street Capital, said that eight of the firm's nine London partners pay tax in the UK.

Enraged by the huge profits earned by the leading players, unions have called for the tax breaks enjoyed by the private equity partners (introduced by Brown while he was at the Treasury) to be removed and for the industry to be more tightly regulated.

The tax breaks enjoyed by the industry - taper tax relief - were originally intended to help entrepreneurs get their businesses off the ground by allowing them to pay as little as 5 per cent in tax.

It was not foreseen at the time that the tax break would apply as equally to the billionaire private equity players as to struggling entrepreneurs.

While Ferguson of SGV Capital may question whether the tax paid by private equity is fair, his peers have mounted a robust defence of the current tax regime, arguing that the breaks are available to business both large and small.

That is not how the unions see it, however, nor small business.

As well as upsetting the unions with the inclusion of Buffini, Mr Brown has also alarmed small business leaders by failing to include any representatives from their ranks on his new business council.

Small business still employs far greater numbers in Britain than the multinationals and small business leaders have long complained that government fails to provide enough support.

As chancellor, Brown became deeply unpopular with small businessmen and women after 10 years of budgets which left them swamped in red tape.

The absence of any smaller business leaders from the new council has swiftly quashed hopes that Brown might prove more receptive to their problems now that he is PM.

One appointment to the council, meanwhile, would appear to fly in the face of the new prime minister's pledge to turn his back on the "celebrity culture" so often associated with the Blair administration.

Eyebrows have been raised in the business world by the inclusion of Sir Alan Sugar among the corporate heavyweights.

His Amstrad group, with its chequered record in recent years, is hardly a corporate titan, and Sir Alan himself is better known these days for his starring role in The Apprentice television series.

Perhaps the new PM is just as star-struck by celebrity as the previous occupant of Number Ten.

Fiona Walsh writes for theGuardian newspaper in London