Capital Gains Tax (Rates)

Debate between Andrew George and Lyn Brown

Monday 28th June 2010 Commons Chamber

[Andrew George]

I am very grateful to my hon. Friend for that comment. There is not just a new coalition Government, but a new Parliament, and in it we should be able to debate issues both across the Chamber and within the parties of the coalition Government. That is not unreasonable. The Chamber should enable greater transparency and discourse across and between parties. The purpose of our amendment is to probe issues that need and deserve to be probed.

[Lyn Brown (West Ham) (Lab)]

Will the hon. Gentleman give way?

[Andrew George]

I shall not give way any more, I am afraid, because of the limit on time.

The motion refers to the Red Book, which, at page 67, in relation to chart A3, describes the VAT change as potentially “progressive”. I think that the notion is based on the expectation that those who spend the least will be less affected. Of course, those who spend the least are inevitably those on lower incomes, who will, as the Red Book explains, pay less VAT in absolute terms. But not everyone agrees with that: the hon. Member for Gainsborough (Mr Leigh) has described VAT as regressive, as have Labour Front Benchers.

The Institute for Fiscal Studies is rather equivocal on this issue. It says that when contrasted with income, VAT does look more regressive as it hits those with high expenditures the hardest. It also says that those with the lowest incomes tend to have the highest expenditures relative to their incomes, so there is an issue that needs to be investigated a great deal more. I believe that the Government should reasonably bring forward an impact assessment of the type that I have described and that we should have an opportunity to debate it not just in the Finance Bill Committee but in the Chamber.

I represent the poorest region in the country, so I am bound to be particularly sensitive to the impact of the Budget on the poor. However, I am not just concerned about low-income families; I am concerned about the impact of the VAT increase on rural travellers, who have a car out of necessity, not luxury, and on charities, as my hon. Friend described a moment ago. I am also concerned about the contrast between the effect on businesses that are engaged in the renovation of older buildings, for which VAT is applicable, and on those that build new buildings, for which VAT is not applicable.

The key themes underlying the emergency Budget turn on the challenges that any Government would have, such as ensuring that those who dropped us into the mess that we are in—due partly to the management of public finances by the Labour party and partly to those in the City who contributed a great deal—should be doing the most to help us out of it. As is made clear in the Budget, there is also an issue regarding wealthy people who have managed to pay less marginal tax than their cleaners. Those people should start paying their way. I hope that the Chief Secretary will consider very carefully our amendment and the reason behind it when he winds up. In this area of policy and policy making, we should have an impact assessment and an opportunity to debate this issue.