Capital Gains Tax (Rates)

Debate between Angela Smith and Viscount Thurso

Wednesday 23rd June 2010 Commons Chamber

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

I congratulate you on your election, Mr Deputy Speaker. This is the first time I have spoken with you in the Chair.

First, let me respond to the hon. Member for Kingston upon Hull North (Diana R. Johnson). The thrust of her speech was almost entirely, “It’s the banks wot done it,” whereas her party, although in government, did not have a great deal of responsibility. She is right in that the major part of the crisis was brought to a head by the irresponsibility of the banking community throughout the world, especially in the UK, but she is not right to ascribe the whole crisis to that one cause, because there are two more that must be taken into account. Probably the most important—it has driven many of the problems in the economy—is the imbalances in the world economy. I served on the Treasury Committee in the last Parliament, and even before Northern Rock, that was something to which Members from all parties were drawing attention. There is a major structural problem in the world economy, and because of our particular weakness in relation to the financial sector, we suffered more than others.

The second thing that has to be taken into account is the amount of debt in the economy. The point is extremely well made by the chart on page 7, which sets out that relationship, so that one can see the inexorable rise of debt in the financial sector in comparison with debt in non-financial companies and households. If I remember the figures correctly, over the past 50 years or so, the consolidated balance sheet of the financial industry has gone from roughly half of GDP to five times GDP. That is the core of the problem: at every level in society we have been living beyond our means, and it is necessary to deal with that.

I want to focus mainly on enterprise, growth and rebalancing the economy, but I should like to make one or two general points about the Budget as a whole. The right hon. Member for Edinburgh South West (Mr Darling) is not in the Chamber now, but having shadowed him as a Minister in several Departments in the last two Parliaments, and having dealt with him in the Treasury Committee, I have great respect for him, and I echo the remarks of my right hon. Friend the Secretary of State for Business, Innovation and Skills about his integrity. He was given a hospital pass when he accepted the keys to No. 11, and it is to his credit that he managed to stay on his feet. None the less there have been some significant mistakes, to which I shall allude.

Looking at the Budget as a whole, I ask myself two questions. First, how would I feel about the Budget if I were sitting in my old home on the Opposition Benches? Secondly, how would I feel about the Budget if I were sitting on the Government Benches supporting a wholly Liberal Democrat Government? We can all have aspirations. Let me answer the first question. I would feel extremely cross, deeply angry and irritated, because I would see a Budget that contained a mass of things for which I had just campaigned and which I had proposed to my constituents as things I wanted to do in government—so I would have been sitting on the Opposition Benches powerless, while whoever was in government was introducing all the measures for which I had fought. I would say to myself, “How on earth do I oppose that?” but I would not be able to come up with much of an answer.

[Angela Smith]

I wonder therefore whether the hon. Gentleman campaigned against Lib Dem policy in the election, and campaigned for massive cuts to the economy now rather than later.

[John Thurso]

As a matter of fact, given my experience on the Treasury Committee, I was extremely careful about what I said. I stated my preferences, but I also stated the principles underlying them; I shall come on to that in a moment. First, however, let me answer my second rhetorical question, which requires a little more consideration. The first thing that I would look at—this pertains to what the hon. Lady was asking—would be whether the deficit needs to be dealt with now in depth. I shall draw guidance from my experience as a member of the Treasury Committee and from my own experience of rescuing nearly bankrupt companies in the past.

In past three years or so on the Select Committee, I observed how often Members in all parts of the House were behind the curve in estimating the scale of the problem. When we looked at Northern Rock in our report “The run on the Rock”, it took time to perceive not only the scale of what happened at that institution but the fact that it was a precursor or early symptom of what was to come later in 2008. I remember the Governor telling us quite late in 2008 how this was a financial crisis that he hoped would not get into the real economy. Looking back, one has to say that that was a false hope.