Capital Gains Tax (Rates)

Guy Opperman Excerpts

Wednesday 23rd June 2010 Commons Chamber

[Chris Williamson]

Unemployment certainly fell in my constituency in the 13 years of the previous Labour Government. I will tell the hon. Gentleman this as well: thanks to the measures that they put in place, poverty was reduced in my constituency, people enjoyed the national minimum wage and were able to get health treatment far more quickly than previously, and children were not taught in overcrowded schools, so let us have no more lectures from him.

Let us never forget that everything that I have described has only been made possible by the vacillating Liberal Democrats, who say one thing then do another. Less than seven weeks ago, the Deputy Prime Minister said that his party represented a new kind of politics, with fresh ideas. What we got was a party supporting reactionary right-wing policies instead. Fewer than seven weeks ago, he was apparently opposed to the self-same right-wing policies that he now endorses. This is what he told his party conference on 23 September last year:

“We know what happens when you simply squeeze budgets, across the board, until the pips squeak. We know, because we lived through it before, under the Conservatives. We remember the tumble-down classrooms, the pensioners dying on hospital trolleys, the council houses falling into total disrepair. We remember, and we say: never again.”

In an interview with Jeremy Paxman on 12 April this year, the Deputy Prime Minister said:

“Do I think that these big cuts are merited or justified, at a time when the economy is struggling to get to its feet? Clearly not.”

That is what he said at that time.

Millions of people who rejected the Conservatives’ right-wing policy prospectus were seduced into voting for the Liberal Democrats by the Deputy Prime Minister’s rhetoric. People actually believed that the Liberal Democrats represented progressive values. How wrong they were. People now see that the reality is very different from the Deputy Prime Minister’s rhetoric. People see that he is now so determined to appease his Conservative masters that he is even prepared to sacrifice his own constituents by opposing a Government loan to Sheffield Forgemasters.

That is nothing new. The Liberal Democrats and their predecessors in the Liberal party have assisted the Conservatives into power in four out of the last seven general elections. It is thanks to the Liberal party splitting the centre-left vote in 1983 and 1987 that Margaret Thatcher was able to secure two landslide election victories. Then the Liberal Democrats did the same thing in 1992, forcing the country to endure another five years of Tory rule. The truth is that they are not a progressive party at all; they are merely a collection of self-indulgent political loners.

All the post-war progressive legislation has been introduced by Labour Governments often in the teeth of fierce opposition from the Tories and sometimes the Liberals, too. Examples include the NHS, the welfare state, comprehensive education, equal pay, civil partnerships, the national minimum wage, Sure Start, the ban on fox hunting, and the Open university, to name but a few.

[Guy Opperman (Hexham) (Con)]

Will the hon. Gentleman give way?

[Chris Williamson]

No, I do not have time.

Some of the country’s greatest progressive advances were brought about by Labour when the size of the national debt was far higher than it is today.

I heard Members of the coalition parties, including the Chancellor, eulogising the Canadian experience of cutting its deficit in the 1980s and arguing for the same approach to be adopted here, but their “Ministry of Truth” description of themselves as “compassionate Conservatives” imposing so-called caring cuts defies all reason. The reality of the Canadian experience saw increased homelessness, overcrowded classrooms, pension cuts and a drastic shortage of hospital beds. On one occasion, the Canadians even emptied a hospital and blew it up in a desperate attempt to save money. Is that really what the coalition parties mean by “caring cuts”?

By contrast, the US President has written to all G20 leaders begging them not to cut spending too quickly. Mr Obama says it is critical that

“the timing and pace of consolidation in each country suit the needs of the global economy”.

He adds:

“We must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession.”

But the Chancellor just does not seem to get it. He is obsessed with implementing an approach that failed in the 1930s, failed in the 1980s, failed in the 1990s and is destined to fail again. He wants to implement an unfair budget that will hit the poorest hardest, undermine the economic recovery, destroy public services and increase unemployment.

David Blanchflower, one of Britain’s top economists, said today that he is

“now convinced that as a result of this reckless Budget the UK will suffer a double-dip recession or worse, not least because there is no room for interest-rate cuts, although lots of additional quantitative easing… from the Bank of England could soften the blow”.

Growth is the key to addressing the deficit, and the Budget is a wasted opportunity. The Chancellor has chosen to penalise the weak and the powerless, instead of making the rich and powerful individuals and institutions pay.

--- Later in debate ---

[Mary Macleod (Brentford and Isleworth) (Con)]

I am grateful for the opportunity to speak in this debate on a matter that impacts on the life of every person in the country, every minute of every day. I congratulate my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) on his maiden speech, in which he spoke warmly about Yorkshire at its best, and said that his constituency was open for business. He took the words out of my mouth, because I was going to say that my constituency was open for business, and that shows how we need the whole country to be open for business after the Budget. My hon. Friend the Member for Carlisle (John Stevenson) also made his maiden speech, in which he spoke about regeneration. I am sure that he will be just and fear not in his time in the House.

This is a serious Budget for serious times. As my hon. Friend the Member for Bournemouth East (Mr Ellwood) reminded us, this is also a day when England were playing a serious game of football. On behalf of the House I congratulate our team on winning the game, and perhaps they will continue to win throughout the World cup.

I really do not know what planet the hon. Member for Derby North (Chris Williamson), who has just spoken, is on. He should be apologising for what the previous Government did to take the country to the brink of ruin.

[Guy Opperman]

The hon. Member for Derby North quoted some statistics at us about the degree of unemployment in his constituency. I am lucky enough to have the paper on unemployment by constituency from June 2010; handily, it was in my pocket as I walked into the Chamber. Without going back 13 years in relation to the Labour Government, let me say that the paper indicates that in Derby North in May 2005 there were 1,318 jobseeker’s allowance applicants, but that that has now gone up to 2,576—a significant increase, one might think, of 95.4%.

[Mary Macleod]

My hon. Friend is absolutely right. That proves that the Opposition are living on a different planet, and that they have not a clue about what they have really done to the country over the past 13 years.

This emergency Budget is very much about a plan for the future. We have shown that we are bold enough to make the tough decisions that need to be made. The Chancellor has been faced with a deficit of a size that we have never seen before. I commend his Budget and his determination to stick to the principles of responsibility, fairness and enterprise. Not acting to reduce the deficit is simply not an option. We are not in a position to decide whether to deal with debts or go for growth, as Labour would have us believe. We have seen from the recent crises in the eurozone that unless we deal with those debts, there will be no growth. This Budget is about achieving balance in our economy by paring spending to affordable levels and stimulating growth so that we can encourage business and enterprise.

--- Later in debate ---

[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).

[Guy Opperman]

Will the hon. Gentleman give way?

[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.