Capital Gains Tax (Rates)

Lord Sharma Excerpts

Wednesday 23rd June 2010 Commons Chamber

[Alok Sharma (Reading West) (Con)]

I start by congratulating my hon. Friend the Member for Carlisle (John Stevenson) on his passionate speech and on speaking up for localism. That is something that Government Members strongly believe in, and I hope that we will see it acted out in the Government’s manifesto.

Having listened to Opposition Members during today’s debate, it is interesting that not a single one of them had anything positive whatsoever to say about this Budget; in fact, many of them have denounced it in no uncertain terms. There has been a great deal of shaking of heads and gnashing of teeth. What always happens in these cases is that Labour develops something called collective amnesia about why we are having to make these tough choices on public expenditure and on taxation. Let me therefore remind them, once again, why that is the case. I see that the hon. Member for Easington (Grahame M. Morris) is laughing, but he really should try to understand why this is happening. The reason is very clear. Under Labour, we have had the deepest recession on record and the longest recession of all the G20 countries. Under Labour, we have ended up with the largest deficit in Europe, and the national debt has doubled.

Let me quote what the co-chief investment officer of Pimco, the largest bond fund manager in the world, said in January 2010:

“The UK is a must to avoid. Its gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks”.

The trajectory under Labour’s plans is pretty clear. If we were to do what Labour is suggesting, we would have the potential loss of our triple A debt rating, higher interest rates, more business failures, and sharper rises in unemployment—everything that nobody, on either side of the House, wants to see. There has been a lot of talk about Greece. Perhaps Labour Members should look at what happens in a country such as Greece when it does not get to grips with its public finances and there is a loss of confidence by the capital markets.

In 1997, the Labour Government inherited a golden economic legacy. In 2010, what did Labour leave the current Government? Oh yes—a note from the former Chief Secretary to the Treasury declaring, “I’m afraid to tell you there’s no money left.” That is exactly why we are having to make these cuts. Let me absolutely clear about this, although Labour Members may not agree: out there—outside this House—very many members of the general public take the view that these public expenditure cuts are ultimately Labour’s public expenditure cuts, and that the tax rises are ultimately Labour’s tax rises.

Of course, the pied piper of Labour’s decade of debt—the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown)—has not been seen in the House for quite some time, but I hope he has had the chance to reflect on the damage his Government’s policies did to our economy, and that when he returns, he will say the one word we had hoped to hear from a Labour Member: sorry. I am sad to say that we have not heard it.

In the past four years, I spent a lot of time talking to businesses and business organisations in Reading, so I should like to spend the rest of my speech talking about the measures in the Budget for them, particularly small and medium-sized businesses, which are the backbone of our economy, save to make one point on public services. We can all agree that we want a world-class health service and the best schools for our children, and we want dignity and financial support in retirement for our pensioners, but to fund high-quality public services, we need a vibrant private sector to lead growth and recovery.

Businesses in my constituency in the past few years have invariably told me that they feel overtaxed, overburdened by red tape and regulation, and overwhelmed by a complex tax system. They want help in getting credit flowing. The base rate may be 0.5%, but that bears little relation to the spreads that businesses must pay when they go for bank debt. We need to get to grips with that. Above all, businesses want us to tackle national debt and to get some confidence back into the country. That is what we hope the Budget will do.

We talked about over-regulation and the tax system. Because of the previous Government, we now have the longest tax code in the world. According to the Federation of Small Businesses, small businesses spend seven hours a week filling out forms. According to the British Chambers of Commerce, new regulation since 1998 has cost British businesses almost £77 billion.

The Thames valley and Reading are relatively prosperous parts of the country, but the recession did not pass us by. Shops closed, businesses folded and people lost jobs. Labour Members say that Labour did a lot to help local businesses, but I can tell them that local businesses in my part of the world and the rest of the country got by because they helped themselves. They increased productivity and took pay cuts, and instead of people working five days a week, they worked four. There has been a lot of pain in the private sector.

[Heather Wheeler (South Derbyshire) (Con)]

My hon. Friend is absolutely right to draw attention to the fact that small and larger businesses have taken the hit. We hear so often from Labour Members that they are worried about what is happening in the public sector, but that sector needs to take a leaf out of the book of the private sector, in which people have taken 10% cuts and four-day weeks. That has not happened at all in the public sector. We are looking for an increase in productivity. A 25% reduction does not necessarily—

[Mr Speaker]

Order. I just very gently say to the hon. Lady that an intervention must be just that; it must not be a mini-speech.

[Alok Sharma]

Thank you, Mr Speaker.

On Government help for local businesses, during the height of the recession, I attended a meeting of more than 100 people from businesses in my constituency. That was when the then Business Secretary, Lord Mandelson, was parading all over the place to tell us about all the schemes he was introducing to help local businesses. When I asked those business people whether a single one of them had been able to access any of the funds that Lord Mandelson was talking about, two hands went up in a room of more than 100 people. Both those people had tried to access the funds, but found the process too complicated and gave up. The reality is that businesses were not helped by the previous Government. I am pleased that in the Budget the Government propose a lower corporation tax rate, simplifying the tax system, reducing red tape and getting credit flowing.

I am delighted that the main rate of corporation tax will be reduced from 28% to 24% over four years, which will end up being the lowest rate among the G7 countries. Local communities, businesses and business organisations in my constituency have told me that they are delighted that the small companies rate will go to 20% instead of the planned increase to 22%, as proposed by the previous Government. On the jobs tax, which was talked about during the election and which universally businesses were not happy about, I am delighted that under the Budget the negative effect of the employers’ rate rise in national insurance will largely be reversed by increasing the threshold for employer NI contributions by £21 a week above indexation. That means that the number of employees for whom employers will pay no national insurance will rise by 650,000.

We will see a simplification of the tax system. As the Budget Red Book makes clear, tax competitiveness is not just about rates and incidence of tax; predictability, stability and simplicity are also important. Like many Government Members, I look forward to the details of the proposed independent office of tax simplification. The key point is that local businesses want time to get on and do business, and not to get bogged down by red tape. I am delighted, therefore, that the Government have said that they understand that the volume and complexity of regulation can damage UK competitiveness. I am pleased, therefore, that we will have a one in, one out system for new regulations as well as the imposition of sunset clauses.

A number of small businesses in my constituency that I have talked to are keen to get a share of the Government’s pie when it comes to spending. Again, therefore, I am pleased that under the Budget the Government plan to promote small business procurement by publishing central Government tenders online from the end of the year. The final thing that many businesses want is credit to start flowing again, and I am pleased to see that recognised in the Chancellor’s speech and reflected in the Budget documentation. The Government recognise the need for banks to promote lending, especially to small and medium-sized enterprises. I am delighted that there is going to be an increase in the enterprise finance guarantee and the creation of the growth capital fund, which will help fast growing small and medium-sized businesses.

Several Members have also touched on the banking sector. It is important that the Government want to ensure that the banking system and the financial markets meet the longer-term needs of the economy, and I look forward, therefore, to the publication of the Green Paper on business finance before the summer recess. This is a tough but fair Budget. We have had to make so many difficult choices because of the legacy left to us by the previous Government. I am pleased that, as part of the Budget, the Chancellor has made every effort to protect the most vulnerable people, including pensioners. That is so important and the hallmark of a fair society. The Budget will focus on returning stability to our economy, on getting the country back on its feet and, over the coming years, on delivering strong growth to the economy.