Capital Gains Tax (Rates)

Baroness Burt of Solihull Excerpts

Monday 28th June 2010 Commons Chamber

[Lorely Burt (Solihull) (LD)]

I congratulate the hon. Members for Thurrock (Jackie Doyle-Price), for Airdrie and Shotts (Pamela Nash), for Maidstone and The Weald (Mrs Grant) and for East Surrey (Mr Gyimah). I agree with the hon. Member for Hartlepool (Mr Wright) that they bring inspiration and enthusiasm to the House. We are all here to try to make things better, and I am sure that all of them will play their part.

The coalition Budget has been described as tough but fair, and hon. Members on both sides of the House will certainly agree that it is tough. Why does it have to be so tough? It is tough because we are borrowing £1 in every £4 that we spend, because we owe £22,400 for every man, woman and child in this country and because, thanks to Labour, we have one of the largest budget deficits in the whole of Europe, so we must take the action that Labour dodged. Now that the OBR has been formed, we know the true scale of the problem that we face, and we have worked it out so that no one can fix the figures anymore.

[Mr Anderson]

Does the hon. Lady disagree with the OECD, which said that the previous Government’s actions prevented this country from going from a recession into a depression? If those actions had not been taken, we really would have been in a mess.

[Lorely Burt]

The hon. Gentleman makes a fair point. Indeed, the Liberal Democrats supported some of the steps that the Labour Government took, but that does not allow Labour Members to wash their hands completely of this country’s financial state.

[Dr William McCrea (South Antrim) (DUP)]

But can the hon. Lady and her colleagues wash their hands of the fact that although they opposed a rise in VAT during the election, they will now go through the Lobby to support it? Surely that is hypocrisy.

--- Later in debate ---

[Lorely Burt]

I am glad that the hon. Gentleman raises the issue of VAT. If he has a little patience, I shall address that fully in just a moment.

I applaud the fairness factors in the Budget, many of which were suggested by Liberal Democrats. The £1,000 increase in the threshold at which people start to pay tax will bring 880,000 people out of tax altogether and benefit 23 million people on low and middle incomes. That increase is the first step towards a Liberal Democrat manifesto pledge. The tax on banks will not affect small banks, but it will allow tax cuts for other types of business to be introduced. The changes to capital gains tax will mean that top earners pay 10% more, although there will be thresholds so that others pay at a lower rate. The rate of 28% is not as high as Liberal Democrats might have gone, but the Government have been advised that 28% is the highest rate that can practically be set before revenue starts to be lost, so that is fair enough.

Pensioners have already been discussed today. They will benefit from the earnings link and the triple lock, which will mean that they receive an increase reflecting earnings inflation or 2.5%. No Labour Member has managed to explain why the Labour Government did not restore the earnings link over 13 years, and never again will we have the disgraceful situation of pensioners receiving a 75p increase, as Labour proposed. Child poverty is addressed through an extra £2 billion for child tax credits, and the pupil premium will help the most disadvantaged children.

This is a Budget for business. Business is the engine that will drive us out of the recession, so we have put our emphasis on ensuring that we have cuts rather than taxes, with a 77:23 split.

The hon. Member for Hartlepool said that this was not a green Budget, but there are good incentives for low-carbon investment through the reform of the climate change levy, the proposals on which will come in the autumn. We also have the green investment bank and the green deal for households, which will enable households to make improvements that will pay for themselves over time.

The reduction in corporation tax also shows that this is a Budget for business. In addition, we are pumping money into Royal Mail, which did not happen under the previous Government. The Budget contains nice little touches such as entrepreneurs relief. It does not involve any indexation or a taper, and the amount that retiring entrepreneurs can enjoy has increased from £2 million to £5 million.

The national insurance threshold increase in 2011 will take 650,000 people out of national insurance altogether. What a contrast that is to Labour’s proposals for a tax on jobs. The enterprise finance guarantee scheme is being extended to 2,000 businesses. Under the regional growth fund, I look forward to our pumping money into the regions, meaning that we are no longer a London-centric Government. We will ensure that the regions get the kind of support they need, especially for new businesses.

Of course, there have been hard choices. The hon. Member for South Antrim (Dr McCrea) talked about VAT, and it is regressive. The hon. Member for Airdrie and Shotts said that we did not know the meaning of that word, but we really do. However, our VAT rate is still below the average for Europe.

[Ian Swales]

Is my hon. Friend aware that after Thursday, when Spain increases its VAT rate by 2%, only Cyprus and Luxembourg will have a lower rate of VAT than we do?

[Lorely Burt]

My hon. Friend is right and I am grateful for his helpful intervention. We must put all these things into perspective. The existing exemptions will apply to items such as food and children’s clothing. My hon. Friend the Member for St Ives (Andrew George) has tabled an amendment about VAT. He is rightly worried about the effect of the VAT rise on particular groups, but I point out that the Red Book states of the chart on page 67 to which he referred:

“Chart A3 shows that the top expenditure decile will lose almost 15 times more, in absolute terms, than the bottom expenditure decile from changes in indirect taxes.”

The increase is not nice, but we feel that it is appropriate.

[Several hon. Members]

rose—

[Lorely Burt]

I am sorry but I cannot take any more interventions.

We have talked about welfare throughout today’s debate, but I should point out that the welfare bill was set to rise to nearly £200 billion and we just cannot afford that. The autumn spending review will treat those most in need as a priority, and although we will make cuts, we will cut carefully. This year’s Labour Budget included plans for £44 billion of cuts and tax rises, but the previous Government did not say how they would raise that money and what taxes they would have increased. Until Labour Members are prepared to tell us what they would have done, they have no right to criticise this coalition Government.