Capital Gains Tax (Rates)
Debate between Gareth Thomas and Guy Opperman(14 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
Yesterday’s Budget should be judged on three key tests. First, will it protect and enhance economic growth, and nurture an all too fragile recovery from the worst global recession since the 1930s? Secondly, is it fair and will the poorest and those least able to defend themselves be affected the least? Thirdly, less than two months after the general election, does it reflect the election manifestos of the coalition Government? On each of those tests, the Government’s Budget is found wanting.
It would be remiss of me not to congratulate the hon. Members for Harrogate and Knaresborough (Andrew Jones) and for Carlisle (John Stevenson) on their maiden speeches. The hon. Member for Harrogate and Knaresborough made a fluent and interesting maiden speech. Having initiated the first debate on social enterprises in this House, I welcomed in particular his interest in and support for social enterprises. He talked about his constituency being affluent and having excellent schools; perhaps at another time, he might acknowledge more generously the part played by the excellent work of the previous Government in that respect. The hon. Member for Carlisle also made a fluent and interesting speech, offering generous praise to his predecessor, Eric Martlew, who continues to be well liked on both sides of the House. I hope that the hon. Gentleman will forgive me for being unable to share his assessment that the Budget was, although tough, also fair, but I shall come to that later.
This is the Conservative party’s Budget—no one seriously thinks that the Liberal Democrats were the driving force behind it, despite the protestations of the Business Secretary and others—and to listen to the Conservatives, one would think that there had not been a global recession. One would think that there was not a need to protect families or to keep demand in the economy, and that the borrowing and other measures that the previous Government took to stimulate the economy were not needed. We took decisive action to invest in the economy and to create the demand that the private sector needed to minimise business failures and job losses.
As the shadow Chancellor made clear, the measures that we took were continuing to have a positive impact. There was a return to growth—fragile, yes, but it was a return to growth. Unemployment was stabilising and starting to fall, while tax receipts were up and borrowing was lower than expected. The Office for Budget Responsibility has made it clear that the measures taken by the last Government are the reason why the economy is growing now. Indeed, those measures were part of Government spending plans which, as the shadow Chancellor pointed out, the party opposite supported until the end of 2008.
The run-up to the Budget was marked by a remarkable level of dangerous scaremongering by the party opposite. The Chancellor has been marching from one television studio to another and, like Don Quixote, he has continued to tilt away at Greek windmills while the Chief Secretary and now the Business Secretary have been competing to be Sancho Panza, bobbing loyally along behind.
We are not remotely in the same position as Greece, yet time after time, Front Benchers and Back Benchers opposite have sought to raise the spectre of Greece to justify the approach behind the Budget. The truth is that this Budget puts at risk a fragile economic recovery. On the OBR’s forecasts, growth will be down this year as a result of measures in the Budget, and down next year too. Unemployment will be higher as a result of the measures in the Budget, which will cut jobs in the public sector and the private sector too because, as my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) noted, many companies supply goods and services to the Government. The OBR acknowledges that employment will drop by 100,000 as a result of this Budget, and it is true to say that many outside voices expect the figure to be higher still. With tens of thousands more on the dole queue and employment levels down, it is fair to say that this is a return to traditional Tory politics.
The Budget also fails the fairness test. It savages support for the poorest and most vulnerable. Child benefit will be cut, and tax credits reduced for families on low and modest incomes. Support for families with young children is being axed, and the VAT rise will hit the poorest hardest. The Conservative party promised not to balance the Budget on the backs of the poorest, yet they have done exactly that. The Financial Secretary may not yet be aware of the damning verdict of the Institute for Fiscal Studies on the fairness of this Budget, but it has said that it will
“hit the poorest hardest and…keep on hitting them more and more every year”.
The same point was made with considerable force by my hon. Friends the Members for Pontypridd (Owen Smith), for Ogmore (Huw Irranca-Davies), for Kingston upon Hull North (Diana R. Johnson) and for Derby North (Chris Williamson), and by the hon. Member for Brighton, Pavilion (Caroline Lucas).
Mr Thomas
Given the time, no. I apologise to the hon. Gentleman.
The Budget also breaks clear promises made to the British people by the coalition partners at the election. The now Prime Minister told Jeremy Paxman in an interview in late April that his party had “absolutely no plans” to raise VAT. He recognised then that VAT was regressive and that it hit the poorest hardest. He said:
“It does, I absolutely promise you.”
The Deputy Prime Minister agreed that VAT was “very regressive”. He went further, making fear of Tory VAT plans a memorable part of his election campaigning. Yet now, with the electorate having cast their votes, we have an immediate volte-face from the parties opposite.
As my right hon. Friend the shadow Chancellor made clear, in a classic effort to pull the wool over the public’s eyes, those on the Government Front Bench use Labour measures to try to pretend that this Budget is fair. The charts deployed in the Red Book to justify that fantasy claim fail to acknowledge the scale of benefit reductions that will not have worked their way through fully in the period covered. They certainly do not include the impact of looming cuts in public services that are likely to hit the poorest households the most, or of changes to housing benefit. I have a specific question for the Financial Secretary: will he publish charts showing the impact of the Budget not just in 2012-13 but in future in years, by income distribution?
It is not just Opposition Members who recognise the unfairness of the Budget. Robert Chote, the head of the IFS, has said:
“The Budget looks less progressive, indeed somewhat regressive, when you take out the effect of measures that were inherited from the previous government—when you look further into the future than 2012-13 and when you include some other measures which the Treasury has chosen not to model.”
Some Liberal Democrats—perhaps those such as the Orange Book Liberals—will be entirely comfortable with the unfairness of this Budget. Others on the Liberal Democrat Benches need to find the courage of the convictions that they had before 6 May to challenge their Front Benchers.
This is a Budget that puts economic growth at risk. It fails the fairness test. The poorest will suffer the most. The IFS analysis blows away the pretence that we are all in this together. It is a Budget of broken promises. On VAT both coalition parties broke election promises. It is a Budget that is overwhelmingly Thatcherite in tone and we will not support it.