Capital Gains Tax (Rates)

Anne McGuire Excerpts

Monday 28th June 2010 Commons Chamber

[Yvette Cooper]

That is a very generous invitation, which I shall pass on to the right hon. Gentleman.

Where are the figures for the analysis of the impact of those proposals on homelessness? Where are the figures for their impact on families who will not be able to pay their rent? Does the right hon. Gentleman have any idea how expensive it is to keep a family in temporary accommodation? That is the problem. That proposal is just like the proposal on unemployment. If the Government do not provide the support up front, it will cost them more later on in terms of dealing with homelessness.

As for supporting families, not even in the worst of the Thatcher years did the Government ever introduce a Budget that hit children so hard. Of the £8 billion that this Budget raises from direct tax and benefit changes, however, £3 billion directly hits children: cutting the child trust fund and the value of child benefit, and overall cuts in child tax credit. That is even before we add the cuts that families face in housing benefit, free school meals, free swimming, the future jobs fund and university places. This is a savage Budget for children. The Government claim that it will be all right because there is not a measured increase in child poverty as a result of this Budget. Of course there is not, because the Treasury model will not measure the impact of changes to VAT or housing benefit, and it will not look ahead any further than 2012-13, before many of the cuts bite.

Look at the people the Secretary of State is hitting hardest—the very youngest children of all. Gone is the baby tax credit, so some mums will now find they cannot afford to stay at home for as long as they want with their little babies. Gone is our plan for a toddler tax credit, gone is the pregnancy grant, and cut is the Sure Start maternity allowance. Has he no idea at all that supporting a family and getting the children out of poverty when the babies are born can save money from the public purse for years to come? Instead, he wants to cut support from the babes in their mothers’ arms. At least Margaret Thatcher had the grace to wait until the children were weaned before snatching their support.

[Mrs Anne McGuire (Stirling) (Lab)]

Does my right hon. Friend recognise that the Child Poverty Action Group has said that this is a disappointing Budget in terms of child poverty and that it will make it very difficult to meet the targets for the eradication of child poverty already set by the previous Labour Government?

[Yvette Cooper]

My right hon. Friend is right. When one takes account of what the Government are doing to housing benefit and VAT, the real consequence of this Budget is that it will push people, including children, into poverty. We remember how the Conservatives did this before in the ’80s: they cut jobs and cut the help for people to get into jobs, they cut the support for people who could not find jobs, they cut help for pensioners, and they cut support for families and ramped up the VAT bills for them to pay. We also remember how those cuts cost us more for generations to come. It cost more to deal with people on the dole, it cost more to help families who were made homeless, and it cost more to deal with the long-term effects on communities devastated by unemployment.

These unfair cuts are not driven by good budgeting. They will cost our economy and they will cost our public finances, too. This is an ideologically driven Budget by a party that simply wants to cut the size of the state, no matter who gets in the way. The truth is that the Conservatives have the youngest, the oldest, the poorest, the weakest and the most vulnerable in their sights. The nasty party is back—only this time they brought along their mates. Shame on them. Both parties have broken their promises; now they want to break Britain too, and we will fight them all the way.

--- Later in debate ---

[Maria Eagle (Garston and Halewood) (Lab)]

In March, before the election, the Chancellor told the News of the World:

“We are all in this together. I am not going to balance the budget on the backs of the poor”,

which was very reassuring for voters to hear before an election. Since the election, both the Prime Minister and the Deputy Prime Minister have tried to argue that the Government and even their Budget are progressive. However, having had a closer look at the Budget and the Government, we can conclude that neither is progressive in political or economic terms. I am afraid that it looks very much like the Chancellor is indeed planning on balancing the budget on the backs of the poor.

I want to spend a little of the time that I have examining the effects of several Budget measures on poorer and disabled people. Disabled people are some of the most marginalised and vulnerable of our fellow citizens, but they are also one of the greatest sources of under-utilised talent and potential in our country. They are generally at the poorer end of the income distribution and they are more reliant on public services than many of our citizens, so the Budget’s impact on them will indeed test the Chancellor’s claim that he is not aiming his Budget at the poor.

I characterise the Chancellor’s overall Budget strategy as further and faster deficit reduction than was planned by the last Labour Government, and an 80:20 split between spending cuts and tax rises in advance of severe spending cuts in the autumn. That is his general approach. We should remember that even the most Thatcherite hawks who did not believe in the existence of society in the 1980s only ever aimed at a 50:50 split between spending cuts and tax rises, so the Chancellor is making the Thatcherites of that time look soft and even-handed. That is not, by the way, how the people of Liverpool remember them for what they did in that decade.

We can say that for most disabled people on lower incomes, who are more dependent than most on public services, the increase in VAT is a disaster. Some Government Members have had the grace to accept that it is a regressive tax. Indeed, both the Prime Minister and Deputy Prime Minister, before the election, said on TV that it was a regressive tax. The deputy leader of the Liberal Democrats, who is in his place, has said so more recently. The increase in VAT, which both the PM and the Deputy PM promised us before the election we would not have, but which they are now both going to invite their hon. Friends to vote for, is not only a joint broken promise that will hit the poorest hardest, but something on which both parties will be judged.

The degree of reliance on spending cuts will also impact much more heavily on poor and disabled people than a more balanced ratio would have done. More than half the £11 billion of welfare cuts will come from indexing benefit rates to the consumer prices index rather than the retail prices index. That sounds technical, but the effect is to set benefits on a permanently lower trajectory, thus year by year compounding the disparity at every uprating, though saving more money for the Chancellor. That, in my book, is the very definition of balancing the Budget on the backs of the poor.

The changes in disability living allowance will be judged not only on that score, which will in itself cut almost £300 a year from the payment. The Red Book also promises us reform

“to ensure support is targeted on those with the highest medical need”

and says:

“The Government will introduce the use of objective medical assessments for all DLA claimants”.

Indeed, one Government Member referred to DLA as a benefit that one languishes upon. However, DLA is an extra costs benefit: it is paid not on the basis of a medical diagnosis, but to compensate disabled people for the extra costs incurred by the effect their condition has on their ability to get around or look after themselves. People who work receive DLA. It is not a benefit that one languishes upon; it is a recognition from society that disabled people need a little extra support to enable them to participate in life.

[Mrs McGuire]

Does my hon. Friend agree with the Essex Coalition of Disabled People, which has indicated that the increase in people claiming DLA has resulted in more disabled people living independently in the community, rather than in the residential care that was in existence in 1993, 1994 and 1995?

[Maria Eagle]

My right hon. Friend is correct. She, like me, is a former Minister with responsibility for disabled people and has had to grapple with these issues.

This proposal is retrograde because it reverts to a medical model of disability, which disabled people themselves resent. It also has enormous deadweight costs. People who have never been able to walk do not need a doctor’s assessment to say that their mobility is restricted. What possible sense is there in subjecting them to one? It just looks like harassment. How does that sit with not introducing a medical for those components of attendance allowance which are the same as the components of disability living allowance? What about pensioners who got their DLA before they turned 65 and still retain it? Are they to be subjected to a medical test? Looking at the Red Book, it seems to me that we have a savings figure attached to this measure of £1.1 billion, and the objective medical test is simply designed to reduce the numbers on the benefit by 20%. The policy has not been thought through. This seems to be a proposal aimed at saving money.

Similarly on housing benefit, the Red Book says:

“Housing Benefit is often criticised as making excessively generous payments that damage work incentives. To address this, the Government will remove payments that trap benefit claimants in poverty instead of providing incentives to work”.

But only one in eight housing benefit claimants are unemployed. The majority are pensioners, disabled people, carers or people in work who are on low incomes. What is the point of making this benefit one that incentivises work when most of the people on it fall into those categories? It is nonsense. If instead we start with a suspicion that the reforms are actually about saving money, and we see that they cut £1.8 billion, we are more likely to get to the nub of the issue.

The Institute for Fiscal Studies says that the welfare reforms are

“A mixed bag, with no consistent objective beyond the desire to save money”.

The private rented sector reforms just decouple the local housing allowance payable from the level of the rent even in local housing markets, which can only result in people falling into arrears and debt, and being subjected to eviction. In the public and registered social landlord sector the reforms are equally worrying. Many disabled people only have their home. It is the foundation of their lives and their security. It is all they have that is their own. These proposals will force people to move house and face increasing levels of debt. If their area gentrifies—nothing to do with them—they have to move on. If their children grow up and leave home, as they tend to do, they have to move on.

What about disabled people who have adaptations in their home? Are they to have to move? Often, those adaptations make life liveable. They are not a luxury; they are a necessity. Having debt and having to move from one’s home is difficult enough for anyone to cope with, but many disabled people are too vulnerable to cope well with such upheaval. How are learning-disabled people, those with severe mental ill health and those with severe physical impairments supposed to go out and look for a new home, as they may have to simply because of these reforms to save money? Disabled people are the least equipped to do that, even before the spending review cuts the support they can get in their local communities to help them with such things.

The Budget is a triple whammy for disabled people: VAT and the cost of living up; incomes and benefits slashed; help and support to navigate those challenges ended. If the Tories do this, they should not have the support of the Liberal Democrats and, quite frankly, the Liberal Democrats should be ashamed to walk through the Lobby tonight to support this appalling Budget.

--- Later in debate ---

[Mr Brian Binley (Northampton South) (Con)]

May I first pay tribute to my hon. Friend the Member for Truro and Falmouth (Sarah Newton)? She is no longer in the Chamber, but she held her own with charm and interest among the many excellent maiden speeches this evening. I congratulate all who made such speeches, especially the hon. Member for Glasgow Central (Anas Sarwar), who delivered an informative, interesting and hard-hitting speech. He clearly has a great future in the House. I know I speak for all hon. Members when I ask that he pass on our good wishes to his distinguished predecessor—his dad.

It will come as no surprise to Labour Members that I welcome the Chancellor’s Budget, but I have been amazed when listening to some of their speeches during the Budget debates. It seems to me that they have a collective delete button that has erased the last 13 years of their memory. I regret the situation left by the previous Government, which has motivated the many tough measures that the Chancellor has been forced to take. I also regret that they left such a massive budget deficit and such a large public sector debt, and that they let spending rip to sustain the previous Prime Minister’s vain boast that he had done away with boom and bust. How empty those words seem now.

[Mrs McGuire]

rose—

[Charlie Elphicke (Dover) (Con)]

rose—