Capital Gains Tax (Rates)

Debate between Maria Eagle and Anne McGuire

Monday 28th June 2010 Commons Chamber

[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.