(8 years, 7 months ago)
Commons ChamberI will make a little progress and then I will take another intervention.
Is the hon. Lady aware that there is ample evidence in the United States and the UK that large amounts—possibly half—of the retained earnings from lower corporation tax actually go into share buybacks, and that those share buybacks, which end up in the pockets of the original shareholders, do not get reinvested in industry, but go back into property and other kinds of non-productive assets?
The hon. Gentleman makes a very important point. That is one of the concerns. It is assumed that the proceeds from those tax cuts will go directly into investment, but the evidence for that does not necessarily stack up. In fact, an estimated £500 billion is not invested in this country at the moment. That is an important point, which is why greater analysis and scrutiny are required, as well as conversations with businesses about what will actually make a difference for them in the long term.
The basic rate of capital gains tax is to be reduced from 18% to 10%, and the higher rate from 28% to 20%. That is set to cost £735 million in 2020 and £2.7 billion over the forecast period. Capital gains tax was paid by only 200,000 taxpayers in 2013, which means that about 0.3% of the population will benefit from a giveaway of more than £600 million in total from the first year. That was not called for or expected. In fact, the Financial Times described it as an “unexpected gift” for wealthy investors. In 2010, the Chancellor told the House that raising capital gains tax was necessary to
“create a fairer tax system.”—[Official Report, 22 June 2010; Vol. 512, c. 178.]
It would be interesting to hear perhaps during the Exchequer Secretary’s wind-up speech what has changed.