Capital Gains Tax (Rates)

Steve Baker Excerpts

Wednesday 23rd June 2010 Commons Chamber

[Huw Irranca-Davies]

I will make a little progress first, and then give way.

The question that we should be asking is: how does this country get itself out of the recession more quickly and in better shape, rebuilding manufacturing and the private sector, with minimum damage to society—to front-line services and vulnerable people and communities —and also while minimising job losses, because we have been there before? I have not always been an MP. I used to work in the private sector, and I went into lecturing. When I was a lecturer, three types of essay were put in front of me. There were the poor ones, and I would offer constructive advice and say, “You need to do this to get better.” There were the essays that were done very well, and even then I said, “You need to tweak and adjust and do better.” There were also the ones that had misunderstood the question. I noticed in the Budget statement yesterday that the headline issue was dealing with the sovereign debt crisis. That was repeated by the hon. Member for Bournemouth East today when he said that the priority is to ensure our financial status to ensure our credit status. Those things are vital, but surely it is at least equally important to avoid the situations that we had in the 80s and at other times. Measures such as the current proposals lead unnecessarily —this is a judgment issue—to greater unemployment than that mentioned in the Red Book. Such levels of unemployment would lead to greater damage to individuals and communities. I really hope that the Chancellor is correct in his approach and that the Liberal Democrats are supporting the right way forward, but I worry that we have seen this all before.

Let us look at some of the detail. The Government are going to adopt the consumer price index for the uprating of benefits and tax credits from April 2011. The effect will be that benefits and tax credits will diminish and wither year after year. On disability living allowance, the Government will introduce the use of objective medical assessments for all DLA claimants from 2013-14. I am waiting to see the detail on that, because extensive work had already been done by the previous Government on welfare reform, medical assessments and the test. The lack of detail is what worries me. Is this approach about using the stick or the carrot? If it is entirely about using the stick, I guarantee that we will be punishing people who are very vulnerable and who do not have a voice to object. If it is about using the carrot as well—our Government were focused on that and I think that the Secretary of State for Work and Pensions, who was looking into social mobility for the Government, suggested that measures should be more about using the carrot—where are those resources to come from? The worrying thing about this Budget is that we have no detail, and I should like to see that detail as rapidly as possible.

On tax credits, from April 2011, the second income threshold for the family element of child tax credit will reduce from £50,000 to £40,000, and from April 2012, the family element of child tax credit will be withdrawn immediately after the child element. Therefore, it is not just higher-rate taxpayers who will be hit by the measures; working couples could also be hit. The combined salaries of two people on low to middle incomes will take them out of that.

Let me touch on one other aspect of detail—the cost of housing benefit. Yesterday, the Chancellor used one example to illustrate how the system is broken. Various pieces of research could have shown another 100 examples similar to the Chancellor’s, but they would be examples of the extremes. Let me put a concern to the House. What will happen if the policy makes families homeless? What will happen when children are dislocated from their schools or their friends, or when vulnerable families are removed from social care packages and support as they flee to cheaper rent areas? Has any thought whatever been given to the effect of the policy on ghettoisation? Was there any discussion in the run-up to the Budget with organisations that represent the homeless, vulnerable families or children in poverty? I would really like to know that.

[Steve Baker (Wycombe) (Con)]

I happen to have worked personally with the Centre for Social Justice in the past couple of years, and I know that colleagues there have put enormous effort into all the areas that the hon. Gentleman has just listed. Of course the CSJ is independent, but the Secretary of State for Work and Pensions is now in the Cabinet. The hon. Gentleman should rest assured that the Conservative party has put enormous effort into all those things.

[Huw Irranca-Davies]

I thank the hon. Gentleman for his reassurance, but I will be reassured when I see the detail. I will be reassured when I see that this policy will not have the impacts that I have just laid out. We are privileged to be here and to be able to speak up for people. Let us speak up, as I am sure he would want to do, for those who could be disadvantaged by the unforeseen consequences of this response to Daily Mail headlines.

“Ending payments like the health and pregnancy grant and slashing child tax credits at a £40,000 joint income threshold is going to put pressure on families already struggling.”

Those are not my words, but those of Bob Reitemeier, the chief executive of the Children’s Society. He added:

“We are also concerned about the amount to be clawed back from the welfare bill over the next five years as the chancellor aims to find savings of £40 billion.”

Gingerbread, the charity for single parents, has said that families having a second child could be worse off by up to £1,200 a year. Chief executive Fiona Weir said:

“Having a baby puts the family finances under pressure. These cuts will really hit families with young children hard.”

The concerns are not mine alone, therefore, and I am genuinely not indulging in party politics. I will say well done to the Government if their proposals are right and they work, but my real fear is that they are acting prematurely and going in too hard, when there are alternatives that are not being considered and which I shall turn to now.

The Chancellor and the Business Secretary regularly cite the examples of Canada and Sweden when it comes to cutting deficits. However, I shall repeat until I am blue in the face that both countries acted against a backdrop of strong economic growth in their export markets. Unless I have missed something, that is not available to countries in Europe, or the eurozone.

Other positive elements in the case of Canada and Sweden were currency devaluation and the active use of monetary policy. However, in the first case we have been there and done that already with sterling and, in the second, hon. Members will know that our base rate is already low.

Without those three little helpers—those three legs of the stool—we do not get the economic support or growth that, under the plans being put forward by the coalition Government, are essential if we are to mitigate the worst excesses of the proposed cuts, beyond the Red Book. What we do get is all the pain of savage cuts, and absolutely none of the gain. That will go on for years.

In fact—I hate to say this, but I am not alone in doing so—we could well go backwards. If, in a year, we are slipping backwards or limping along like some invalid at the bottom of an economic cycle, it will not be because people such as me failed to stand up and make the opposing case. It is important that someone does that, alongside the economists outside the House.