Capital Gains Tax (Rates)

Ian Swales Excerpts

Monday 28th June 2010 Commons Chamber

[Yvette Cooper]

The hon. Gentleman will struggle to defend his progressive history if he quotes selectively from the figures. He knows that the Budget sets out the additional cuts and savings that he will make from benefits, tax credits and public service pensions from the switch to CPI indexation from 2011-12, which includes, as he well knows, the additional pension and much additional support for pensioners—and which he hid from pensioners on Budget day. That will lead to cuts of £1.17 billion in 2011, £2.2 billion in 2012, and £3.9 billion in 2013.

Perhaps the hon. Gentleman should also consider this: he had his negotiations with the Conservatives about the personal allowance that they were so keen on, yet they failed to consider extending that personal allowance increase to pensioners. They left pensioners out. If he really cared about pensioners, he might have increased the personal allowance for pensioners. As a result, all the pensioners across the country do not benefit from the increase in personal allowance, but they will pay hundreds of pounds extra every year in VAT—an increase that members of his party opposed, campaigned against and shouted about in the run-up to the election. Where are their principles now? Now they are ditching all those commitments and all those principles because they are happy for pensioners to pay hundreds of pounds a year more in VAT.

[Ian Swales (Redcar) (LD)]

Can the right hon. Lady remind me, a new Member, which Government it was who gave pensioners a 75p a week increase?

[Yvette Cooper]

I do not think that was right. That is why it was right to increase the support for pensioners, to increase the winter fuel allowance and to bring in a floor, so that never again would pensioners face such an increase.

Members on the Government Benches jeer and call, but what are they going to do to the winter fuel allowance and to free bus passes? They are already briefing the newspapers that they plan to cut the winter fuel allowance and free bus passes, and that that is needed to protect the police and public services. I invite the Secretary of State to intervene and to confirm that he will make no cuts in the winter fuel allowance every year for the next five years.

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[Mr Eric Illsley (Barnsley Central) (Lab)]

I congratulate the hon. Member for Maidstone and The Weald (Mrs Grant) on her maiden speech. As she admitted, she has a difficult act to follow, but the confident and assured way in which she addressed the House shows that she is well up to meeting the challenge. We look forward to listening to her on many occasions in the future.

This Budget is hypocritical, regressive and vindictive. It is hypocritical because, as recently as April, both the Prime Minister and the leader of the Liberal Democrats rejected the idea of an increase in value added tax. The excuse that they have given since forming the coalition Government is that they found that matters were much worse than they had thought once they managed to see the books. I find that somewhat difficult to swallow, given that the problems relating to our finances have been well documented.

I tend to agree with my hon. Friend the Member for Coventry North West (Mr Robinson) that the Government have been suckered into believing information from the Bank of England about the danger of our being sucked into eurozone problems, when in fact we are in no such danger. Before the banking crisis and the recession struck, our historic debt stood at about 40%, a level comparable to that in some other regions. It was not particularly excessive.

It is rather galling that the Liberal Democrats have fallen so easily into the coalition Government, agreeing not only to the £6 billion of cuts that affect my area but to the cuts that form part of this emergency Budget. They seem to sit comfortably in this cutting Government; they seem to be comfortable wearing the Tory mantle that they appear to have assumed. I think that many people in the country will rightly feel that they voted for Liberal Democrat Members of Parliament only to be presented with Tories.

The Budget is vindictive because it attacks the less well off: the lower paid and benefit claimants. The hon. Member for Peterborough (Mr Jackson) let the cat out of the bag when he called it a Conservative Budget—a traditional Conservative Budget, which attacks the public sector and cuts the welfare state. Are the Government trying to tell us that, in an emergency Budget, they will remedy all the ills of recent years in which our welfare budget has increased? Are they going to do all that in one Budget? Surely not. Surely they could have taken time to examine our debt problems in depth before making slashing, swingeing cuts such as these.

It seems that we are returning to the old Tory mantra: if it is provided by the public sector it is bad but if it is provided by the private sector it is good, and everything to do with the private sector is far superior to everything to do with the public sector. That simply will not wash. It is the old dogma that we have heard in the past.

VAT is obviously a regressive tax. It affects the less well off far more than those on higher incomes. It is a question of involuntary versus voluntary expenditure. Yes, people on higher incomes will pay more in VAT, because they will spend more of their disposable income on luxuries. Unavoidable expenditure on food, groceries and other necessities will affect the lower paid much more than the well off.

[Ian Swales]

Will the hon. Gentleman give way?

[Mr Illsley]

No, I will not.

As we have heard time and again this evening, housing benefit cuts will throw people out of their homes. It is apparently assumed that those people can move from one end of the country to another to find employment, but slashing public sector spending by 25% in every Department will surely result in further job losses. Here we are, throwing people on to unemployment benefit while at the same time cutting the welfare state that is designed to assist them. That will have an impact on areas such as mine, in which there are high levels of public sector employment. Why does my area have a high level of public sector employment? Because a certain previous Government removed its one major industry, the coal industry, many years ago. We have struggled to find incoming investment and employment to compensate for those job losses, and, as has been mentioned, when the coal industry was being closed down the Government of the time encouraged workers to go on to incapacity benefit rather than unemployment benefit because that reduced the unemployment figures. We therefore have a legacy of higher numbers of claimants of incapacity benefits such as disability living allowance. As for the idea that we will bring in a medical test for DLA, the conditions for DLA are based on care needs. They are based not on the medical condition of the person claiming, but on whether they require care throughout the day or night. The introduction of a medical would therefore remove a lot of people from that benefit, probably unjustly.

Why have the Government decided to cut at the ratio of 80:20? Why does the cut suddenly need to be so great? The hon. Member for Peterborough made the point that this is a Conservative Budget. The Conservatives have, with the co-operation of the Liberal Democrats, taken the opportunity to attack the public sector and the welfare state, just as they have done in the past. This is simple opportunism to cut the welfare state and the public sector work force.

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[Ian Swales]

Is my hon. Friend aware that after Thursday, when Spain increases its VAT rate by 2%, only Cyprus and Luxembourg will have a lower rate of VAT than we do?

[Lorely Burt]

My hon. Friend is right and I am grateful for his helpful intervention. We must put all these things into perspective. The existing exemptions will apply to items such as food and children’s clothing. My hon. Friend the Member for St Ives (Andrew George) has tabled an amendment about VAT. He is rightly worried about the effect of the VAT rise on particular groups, but I point out that the Red Book states of the chart on page 67 to which he referred:

“Chart A3 shows that the top expenditure decile will lose almost 15 times more, in absolute terms, than the bottom expenditure decile from changes in indirect taxes.”

The increase is not nice, but we feel that it is appropriate.