Capital Gains Tax (Rates)

Yvette Cooper Excerpts

Monday 28th June 2010 Commons Chamber

[Mr Duncan Smith]

I was not going to deal with that at this point, but while we are on it, I can tell my hon. Friend that I know there has been speculation in the media over the past few hours and days. I can confirm that, as we said previously, we will launch the work programme in 2011, and will migrate current incapacity benefit claimants to employment support allowance over the three years. We have absolutely no intention of changing the current plan to assess 10,000 claimants per week over the period. That is our expectation. As the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) will know, it will involve challenges, but we will stick to it and see if we can get there. Unlike the last Government, we will provide an extra bit of help for those on employment support allowance who undergo the work capability assessment and need that support. My hon. Friend the Minister of State will table a statement tomorrow giving more details.

I am sure that the right hon. Lady—my opposite number—will back up what I have said. She has already expressed the hope that we will proceed with the changes that she introduced and with which we agreed.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

Will the Secretary of State confirm that his timetable is the one that we proposed for the roll-out of the work capability assessment, and that it is expected to save about £1.5 billion over the next five years? Does he plan to make additional savings, and if so, where? The briefing that was in the papers today will have caused concern to people. Will the Secretary of State also tell us whether he will implement the small amendments to the work capability assessment that we announced just before the election in response to points raised by the citizens advice bureaux?

[Mr Duncan Smith]

We are continuing with the programme that the right hon. Lady left. We thought it a good programme, and I want to make it happen. She asked us to do that, and I agreed that it was right. We always said in opposition that we would do it.

As for whether we are looking for more savings, we are going to intensify the work support programme, which was not there before. I should be happy to give the right hon. Lady more detail about it, and my hon. Friend the Minister of State will make a more detailed statement. We estimate that we will be able to return more people to work, but we will keep that estimate under review. The right hon. Lady will recall that when she was Secretary of State there was a constant review of the programme to deal with the group who were flowing in. Recommendations were made, and we are paying attention to them.

[Yvette Cooper]

Does the fact that the Secretary of State thinks he will be able to help more people to return to work—although he has cut the job guarantee and billions of pounds from the support that would help them to do so—mean that he thinks that other people will not get jobs instead, or is he suggesting that the Office for Budget Responsibility will raise its forecast of the number of people in employment? Where will the jobs come from for the extra people whom he is going to return to work?

[Mr Duncan Smith]

The right hon. Lady is assuming that the economy is static, and that nothing changes in it. We believe that unemployment will fall—that is what the Office for Budget Responsibility says—and that we will therefore create more jobs.

The right hon. Lady’s programme, which we inherited, provided support for the “back to work” element in only two parts of the country. We are extending support to the whole country, and that is where we will get the extra effort. We will continue the programme. We think that we have embellished it and made it somewhat better, and I guarantee that we will keep it under permanent review.

The third thing that we are doing is setting down a strong foundation for long-term reform, which is part of the Budget proposals. Although we must correct the failings of the last Government, we are committed to delivering a better future for Britain, and we have had to make the stability of our economy a priority. I know that it is difficult for many Opposition Members to talk about this, but I also know that it is what they would be talking about if they were in government. There are always difficult choices to be made at a time when we have to draw our horns in.

We have had to prioritise the stability of our economy lest we forget the shambles with which we were left. Borrowing will be £149 billion this year, the second largest amount in Europe, and, as the Prime Minister pointed out before the Budget, it was on course to double in five years to £1.4 trillion—£22,000 for every man, woman and child. As a result of the Budget, however, the debt will fall to £116 billion next year, £89 billion the following year, and £60 billion in the year after that. It will fall to £37 billion in 2014-15, and is projected to fall to £20 billion in 2015-16, with the current structural deficit back in balance. That is the task that we have set ourselves. That was the first test of this Budget: to tackle borrowing and get the deficit down. Our approach has been reinforced by the judgments of the credit rating agencies and the business lobby when they agreed on Budget day that the plan is credible. Measures include reducing current expenditure by £30 billion a year by 2014-15, stronger medium-term growth with more business support to restore UK competitiveness, and reducing regulation and tax rates; and unemployment is forecast to fall throughout the OBR’s forecast period.

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[Mr Duncan Smith]

Directly in terms of this Budget, there will be no increase at all; that figure is approved by the OBR, and it is our determination to drive the figure down. Let me say to my hon. Friend that he is right: we have inherited from Labour one of the worst records of household unemployment in western Europe and, worse than that, we have the highest number of children living in workless households in the whole of western Europe. That is a shameful record of the previous Labour Government, and although Labour Members go on about it, it is we who have to deal with it, and I promise my hon. Friend that we will deal with it.

[Yvette Cooper]

Will the Secretary of State confirm that the number of children living in workless households has fallen from about 2.3 million in 1997 to 1.8 million today, and that it was, in fact, his party when in government previously that trebled the number of children in poverty?

[Mr Duncan Smith]

If the right hon. Lady wants to go on fighting past elections, she can; it will not change the results of them. The reality is that under her Government, child poverty rose—[Interruption.] It rose from 2004 onwards, and the Government threw a lot of money at it and absolutely failed. Under her Government, in the last seven or eight years child poverty has risen dramatically, and I have to point out to her that she has failed to recognise that as a result of their policies child poverty is now at serious risk of rising even further. We have to get it down.

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[Mr Duncan Smith]

I will give way in a second; I think that I have been reasonably generous.

I should like to return to the choice on the uprating of benefits—something on which, I guess, Opposition Members will want to intervene. Before the Budget, there was some media speculation, much of it fed by the Opposition. In fact, I think that the right hon. Member for Normanton, Pontefract and Castleford said that she would not support a freeze of benefits and that she would definitely want to oppose that. The media speculation was that we would go to that—in fact, I believe that that would have saved some £17 billion over the lifetime of this Parliament—but I resolved not to do that. We decided that it would be unfair for the worst-off. Instead, the Chancellor and I agreed that we would continue to uprate benefits by the consumer prices index, which is forecast in the Budget to be 2.7% this year. Of course, the CPI does not include housing costs, and it seemed more reasonable. However, the right hon. Lady was reviewing that before she left office, and I am sure therefore that she will want to tell me that she agrees with the uprating, rather than remaining as we were. I would therefore like her to tell me exactly what reduction in spending she was planning as her Department’s share of the £45 billion. I will give way to her if can tell me which elements of saving she would have made in her budget. She does not want to use the CPI; what was she going to do that added up?

[Yvette Cooper]

In fact, as the right hon. Gentleman will be aware, the additional support that we have put in to help the unemployed has kept unemployment at about half the level of previous recessions and nearly 750,000 lower than it was predicted. That in itself is likely to save more than £15 billion over the next five years. We believe that the right way to do welfare reform is help people into work, not just to slash the support for the most vulnerable people in society.

[Mr Duncan Smith]

I am very sad that the right hon. Lady chose not to answer the question. When I give way to an intervention from now on, I will ask Opposition Members—this goes for all of them—the very simple question: what would they have reduced? They were in government not two months ago, and they have left us with a terrible problem.

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[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

The Secretary of State told us in May in his first speech that he would work to improve the quality of life of the worst-off in Britain. He said that

“we are here to help the poorest and most vulnerable in our society.”

He has just spent 40 minutes defending a Budget that kicks the poorest and the most vulnerable in the teeth. How does that sit on his conscience? Was it his idea, or was it the Treasury’s, to tell a woman in her fifties, who has given up work to look after her elderly parents that, in fact, what they wanted to do was cut housing benefit and make her pay VAT—hundreds of pounds a year—and that even her carer’s allowance over the next five years would be cut in value by about £90 a year? Was it his idea, or was it the Treasury’s, to tell someone who is severely disabled—

[Mr Duncan Smith]

rose—

[Yvette Cooper]

Perhaps the right hon. Gentleman can answer this point as well if he is going to respond. Was it his idea, or was it the Treasury’s, to tell someone who is severely disabled and really cannot work, “We’re going to cut the value of support over the next five years by £300 a year”? If he could answer those points, that would be very welcome.

[Mr Duncan Smith]

I should be grateful if the right hon. Lady answered the original question. She was in government not two months ago. [Interruption.] No—the Opposition have to recognise that they have only just left government, so we have a legitimate right to ask the question. They left the deficit behind, which will lead to real problems for Britain—we have had to resolve it. If she does not like what we have done, what would she have done instead? Will she answer that question?

[Yvette Cooper]

The right hon. Gentleman has not answered the question. He has not explained why he claims to help the poorest and most vulnerable, yet is cutting the benefits of those who are poorest and most vulnerable in society. Government Members like to claim that this is inevitable. This is an ideological choice that they are making. They have chosen to cut an extra £40 billion from the economy. They have chosen to cut an extra £11 billion from the value of benefits and tax credits. They have chosen to cut an extra £17 billion a year from Government Departments, and they have chosen to increase VAT. They have chosen to cut the deficit at a pace that is not only unfair and destructive to our public services but damaging to our economy.

[Elizabeth Truss (South West Norfolk) (Con)]

Will the right hon. Lady tell us exactly what the maximum level of housing benefit should be? Does she think it right that we are paying people more than £100,000 a year?

[Yvette Cooper]

No, I do not, which is why we introduced cuts in support for the highest rents as a result of the previous Budget, and set out a series of further reforms. I want to return to the point about housing benefit in a moment, because it is important.

[Clive Efford (Eltham) (Lab)]

On page 33 of the Red Book, paragraph 1.102 makes it quite clear that the Government intend to reduce housing benefit to people of working age if they under-occupy council housing. In his response to an intervention, the Secretary of State referred to pensioners under-occupying social housing. Does that not give the lie to what is in the Red Book, and show the real intention of housing benefit changes, which are an attack on pensioners?

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[Yvette Cooper]

My hon. Friend makes an important point, and I am happy to accept an intervention from the Secretary of State if he wants to clarify the position, because he did indeed discuss pensioners who under-occupy homes across the country. It is right that we help and support people who want to move to smaller homes as they grow older, but he needs to give us an answer. If he is telling elderly people and pensioners that they are going to have to move out of the home where they have lived all their lives, and where they have brought up their children, that has severe consequences. He must clarify his position, because my hon. Friend is right.

[Simon Hughes]

The right hon. Lady’s attack appears to be that the measures introduced by the Government are ideologically driven—something that is difficult to justify with regard to my right hon. Friend the Chief Secretary to the Treasury; the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb); and others, who have a record of campaigning for the poor and disadvantaged. Might not the same fallacious argument explain why, for 13 years, the Labour Government never linked pensions to earnings? Was that an ideological option? I hope it was not but if it was, the right hon. Lady cannot make the argument, because it is fallacious.

[Yvette Cooper]

The hon. Gentleman is right that there are many members of the Government who have indeed campaigned against poverty for many years, which is why their betrayal of the people whom they have stood up for is shocking. He will recall, too, that it was the Labour party that legislated and changed the law to restore the link with earnings. He should look rather carefully at the increase that, in practice, pensioners will receive over the next few years compared with the old standards. He will find that the new proposals are rather less generous than they appear at first sight.

[Chris Bryant]

Is there not also a real danger that the Government are presenting us with a straw man on housing benefit? In many of the constituencies that have the biggest problems in the land in trying to get people into work, it is not a question of people being paid more than £400 or of their living in houses that are too large, but of people living in houses that are not large enough and not looked after well enough by unscrupulous landlords. What we need to do if we want to help young people to grow up in households where there is work is to give them real opportunities to work.

[Yvette Cooper]

My hon. Friend is right that the key is helping people into jobs, yet the Budget cuts the number of people in work, increases the number of people on the dole, cuts the help for people to get back to work, as well as cutting the income of carers and the severely disabled, cuts help for kids, and hits the elderly with a VAT hike. Nothing in the Budget will get a single extra person back to work. Instead, it cuts the number of people in work.

[Kwasi Kwarteng (Spelthorne) (Con)]

To what degree does the right hon. Lady believe that the previous Labour Government were responsible for the massive budget deficit that we face?

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[Yvette Cooper]

We have been through the greatest global recession for many generations. That has had an impact on economies across the world, pushed up unemployment across the world, and pushed up borrowing across the world. We think it was the right thing to do to increase borrowing in response to the recession. That is why unemployment in this recession has been about 5%, compared with 10% in the recession of the 1980s and 1990s. Helping more people back into jobs has saved us money and also helped to put borrowing in a stronger position.

Minister after Minister has tried to pretend that this is a fair and a progressive Budget. The Liberal Democrats are clinging to the fig leaf of their increase in personal allowances, despite the fact that it is more than blown away by the hike in VAT. The Prime Minister said last year about VAT that

“it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you. . . VAT is a more regressive tax than income tax or council tax.”

That, then, will be why the Government have cut council tax, cut income tax and increased VAT to pay for it. As the Institute for Fiscal Studies made clear, the Budget is regressive, no matter how many times Ministers try to pretend the opposite.

[Bob Russell]

Does the right hon. Lady agree with the study by the Fabian Society and the Webb Memorial Trust that shows that 20% of the population is living in poverty? Talking about betrayal and 13 years of Labour Government, the inequality in Britain today, on some measures, is at its highest since the early 1960s.

[Yvette Cooper]

As the hon. Gentleman knows, the level of child poverty is some 600,000 lower than it was in 1997 as a result of the action that the Labour Government took. He also knows that we deliberately made the measures of poverty by which we were judged relative measures. Of course, that makes matters harder as the economy grows, and of course there is always more to do. That is why we believed it was right to do more to help the poorest and those who were struggling—in contrast with this Budget, which does the opposite. Pensioners do not get the income tax cut, but they have to pay more in VAT. Those on the lowest incomes do not get the income tax cut, but they have to pay more in VAT.

The Ministers are like fraudsters in the fairy tale, telling gullible Liberal Democrat MPs about the beautiful progressive clothes that the emperor is wearing, if only they are clever enough and loyal enough to see them. Liberal Democrats are clinging desperately to shreds of invisible cloth, reaching deep into their Liberal and Conservative history to pretend that they can be progressive now. They are claiming that Keynes might have backed the Budget. They are calling on Beveridge for support, kidding themselves that they can call on their history and that they are following in the footsteps of great liberal Conservatives like Winston Churchill, who supported the minimum wage, but the truth is that the emperor has no clothes.

The truth is that if we look at the detail, the Budget is nastier than any brought in by Margaret Thatcher. Instead of Churchill, Keynes or the founders of the welfare state, the Liberal Democrats have signed up, with the Secretary of State for Work and Pensions and his Chancellor, to cut support for the poor. It is perhaps apt that in this week of World cup disappointments, it was a footballer who got it right. In 2002, after England were defeated in the World cup by Brazil, Gareth Southgate reflected ruefully on England’s performance and said:

“We were expecting Winston Churchill and instead got Iain Duncan Smith.”

That is the reality for the Liberal Democrats now. With all their high hopes, they have betrayed the poor and the vulnerable, whom they stood up to defend.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

rose—

[Yvette Cooper]

I will give way to the hon. Gentleman because I know he has a history of supporting people on low incomes. I do not know why he is betraying it now.

[Steve Webb]

I am grateful to the right hon. Lady. Will she confirm a fact for us about the pension rise that she pencilled in for 2012? Whereas we have guaranteed a minimum of 2.5%, can she confirm that her spending plans proposed a pension rise below 2.5%?

[Yvette Cooper]

As the hon. Gentleman knows, the old uprating rules are that the pension should go up by either RPI or 2.5%. If he had stuck to those old rules, pensioners would be better off in 2012, 2013 and 2014. As he also knows, all parties supported restoring the link with earnings in the next Parliament, but his proposals cut the support for the additional pension for 6 million women and 4 million men by £100 a year, as a result of his upratings by CPI, rather than RPI.

[Steve Webb]

As a new Minister, I have had to reply to many letters complaining about what the previous Government did. One of things that people complain about is the freezing of the additional pension by the right hon. Lady’s Government in April 2010. Can she confirm that under our CPI policy, the pension would have gone up in April 2010? Can she confirm that she froze that pension for millions of people?

[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.

[Mr Duncan Smith]

I tell the right hon. Lady that the coalition gave a commitment. We are paying the winter fuel payment.

[Yvette Cooper]

I hope that meant for this year, next year and future years. [Interruption.] The right hon. Gentleman says that he is paying the winter fuel payment in full. It is not clear, however, what he thinks the full level is. Perhaps he could make the same commitment about free bus travel. Will he stick with free bus travel and not cut it for the next five years?

[Mr Duncan Smith]

I shall tell the right hon. Lady what I am going to do. I am going to answer questions when she answers this question: what would she have reduced with a £45 billion requirement on her head to cut the deficit? Until she owns up and answers that question, she has no right to ask us any more.

[Yvette Cooper]

The right hon. Gentleman has gone £40 billion further. He has proposed an additional £40 billion of cuts that we do not think are the right thing to do. He asks what we would have done, but I am sure that he has read chapter 6 of the March Budget, which sets out £20 billion of saving cuts in some detail and a further £19 billion in tax increases. I shall tell him what else we would not do: we would not waste money on measures such as free schools and the married couple’s allowance.

Nothing in the Government’s plans will get a single extra person back to work. In fact, the opposite is true. The Budget cuts the number of jobs in the economy by 100,000 a year. It increases the number of people on the dole by up to 100,000 a year, and that is on the admission of the experts the Government appointed. At the same time, the Government are cutting 200,000 jobs and training places and the youth guarantee and job guarantee schemes. How on earth will they get more people into work if they keep cutting jobs?

[Mr David Anderson (Blaydon) (Lab)]

Does my right hon. Friend share the concerns of the Royal College of Nursing, which, in relation to a Department that allegedly is protected, suggests that at least 5,500 and, possibly, as many as 30,000 front-line nurses’ jobs will go?

[Yvette Cooper]

My hon. Friend is right that the Government’s proposals do not even include the consequences of the spending review and the proposed additional £17 billion of cuts in public services.

We think that it is better for people to be in work than on the dole, and that is why we funded the future jobs fund and additional support and jobs. They were often in the community and run by the voluntary sector, and they helped young people to obtain the skills that they needed and to stay off the dole. Yet, shockingly, the Government have cut 90,000 jobs through the future jobs fund, putting all those people—additionally—back on to the dole and pushing up unemployment bills. As a result, even on the OBR’s calculations, those measures will cost the Government £2 billion more over the next four years. They will have to pay additional benefits for the unemployed, and the financial, economic and social price of higher long-term unemployment will cost us more for years.

[Mr Edward Timpson (Crewe and Nantwich) (Con)]

Will the right hon. Lady give way?

[Yvette Cooper]

I want to make some progress before I do.

The Secretary of State also said that he wants to make work pay. Yesterday he told Sky that there are marginal tax rates of 90p in the pound for some young people, that that was regressive and that he wanted, first, to change the system so that they are able to keep more of their own money. But, page 69 of the Red Book shows that as a result of the Budget an extra 20,000 people will lose more than 90p in the pound.

We agree that housing benefit needs reform, and we brought forward some measures in the March Budget and introduced a consultation paper last December to set out our proposals. We agree also that we have to stop some of the most excessive rents being paid, and that we should exclude some of the highest rents in every area. However, we should also consider how we provide more security and payments for people moving into work, so that work incentives are improved. There is a strong case for linking housing benefit to tax credits in the longer term, but the Government’s proposals do not set out any reforms; they set out only cuts, and destructive ones at that. Their plans cut almost £1.7 billion a year from housing benefit, and there is no analysis of how many people that measure will push into poverty or homelessness.

[Mr Slaughter]

There are clearly no poor people left in Southwark—certainly none on housing benefit, or the hon. Member for Bermondsey and Old Southwark (Simon Hughes) would not have the temerity to support the Budget. However, there are poor people in Hammersmith, Islington, Westminster and Kensington, so does my right hon. Friend agree not only that it is wrong to force thousands of families out of London, but that such measures will do nothing to get people into jobs, nothing for family break-up figures and nothing for community cohesion in London?

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[Yvette Cooper]

My hon. Friend is right that those proposals will have an impact on families and on entire communities. Almost £1 billion will be taken from tenants in the private rented sector—almost 20% of their support. If tenants have on average 20% of their payments cut, how many of them does the right hon. Gentleman think will really be able to carry on paying their rent? People in Wakefield will lose £20 a week; people in Barking will lose £40 a week; and people in Broxtowe will lose £30 a week. That is before they face the cuts in tax credits and the hit from extra VAT.

[Glenda Jackson]

The Secretary of State cited a four-bedroom house in the private sector. My constituency is served by two local authorities, and in Brent the medium price for a four-bedroom house is £450 a week. In Camden the medium price is £1,020 a week. Currently, 42% of people claiming housing benefit in Brent and 18% of people doing so in Camden are in the private rented sector. That represents a sizeable number of families who will clearly lose their homes under the current Government.

[Yvette Cooper]

My hon. Friend is right to raise concerns, particularly as many people who receive housing benefit are in work. They work hard, are in low-paid jobs and cannot afford to pay their rent without the extra help that housing benefit brings. So, the Government’s measures will hit people who work hard to support their families and make ends meet. They will find the rug withdrawn from under them.

I am particularly concerned about the combined proposals for lone-parent families, and I ask the Secretary of State to look at them, because he says that lone parents with five and six-year-olds will move on to jobseeker’s allowance and have to look for work. However, his own documents, which were provided at the same time as the Budget, assume that only 10% of those lone parents will leave benefits because of the risk they might be less work ready or need more time to find a suitable job that fits with their caring responsibilities.

Many lone parents need additional support to find work that fits school hours, but as a consequence of these proposals about 90% of them will still be on jobseeker’s allowance one year later, at which point they will suddenly be hit by the right hon. Gentleman’s 10% cut in housing benefit. Lone parents with young children might work really hard to find a job that fits school hours, but suddenly an average of £500 a year will be taken from their incomes because they cannot find work and because, as a result, he wants to cut their housing benefit. That is deeply unfair on families who might work really hard to try to make ends meet. What does he expect people to do? Hundreds of thousands of people will struggle to pay their rent, and parents will have to move house, shift their kids out of school, move long distances and break up communities in order to try to find an affordable home.

[Emily Thornberry]

Given that the Secretary of State seems to think that we are exaggerating the position, does my right hon. Friend agree that it might be a good idea if he spent a morning with me visiting some of the Islington families who will be profoundly affected by those changes to housing benefit?

[Yvette Cooper]

That is a very generous invitation, which I shall pass on to the right hon. Gentleman.

Where are the figures for the analysis of the impact of those proposals on homelessness? Where are the figures for their impact on families who will not be able to pay their rent? Does the right hon. Gentleman have any idea how expensive it is to keep a family in temporary accommodation? That is the problem. That proposal is just like the proposal on unemployment. If the Government do not provide the support up front, it will cost them more later on in terms of dealing with homelessness.

As for supporting families, not even in the worst of the Thatcher years did the Government ever introduce a Budget that hit children so hard. Of the £8 billion that this Budget raises from direct tax and benefit changes, however, £3 billion directly hits children: cutting the child trust fund and the value of child benefit, and overall cuts in child tax credit. That is even before we add the cuts that families face in housing benefit, free school meals, free swimming, the future jobs fund and university places. This is a savage Budget for children. The Government claim that it will be all right because there is not a measured increase in child poverty as a result of this Budget. Of course there is not, because the Treasury model will not measure the impact of changes to VAT or housing benefit, and it will not look ahead any further than 2012-13, before many of the cuts bite.

Look at the people the Secretary of State is hitting hardest—the very youngest children of all. Gone is the baby tax credit, so some mums will now find they cannot afford to stay at home for as long as they want with their little babies. Gone is our plan for a toddler tax credit, gone is the pregnancy grant, and cut is the Sure Start maternity allowance. Has he no idea at all that supporting a family and getting the children out of poverty when the babies are born can save money from the public purse for years to come? Instead, he wants to cut support from the babes in their mothers’ arms. At least Margaret Thatcher had the grace to wait until the children were weaned before snatching their support.

[Mrs Anne McGuire (Stirling) (Lab)]

Does my right hon. Friend recognise that the Child Poverty Action Group has said that this is a disappointing Budget in terms of child poverty and that it will make it very difficult to meet the targets for the eradication of child poverty already set by the previous Labour Government?

[Yvette Cooper]

My right hon. Friend is right. When one takes account of what the Government are doing to housing benefit and VAT, the real consequence of this Budget is that it will push people, including children, into poverty. We remember how the Conservatives did this before in the ’80s: they cut jobs and cut the help for people to get into jobs, they cut the support for people who could not find jobs, they cut help for pensioners, and they cut support for families and ramped up the VAT bills for them to pay. We also remember how those cuts cost us more for generations to come. It cost more to deal with people on the dole, it cost more to help families who were made homeless, and it cost more to deal with the long-term effects on communities devastated by unemployment.

These unfair cuts are not driven by good budgeting. They will cost our economy and they will cost our public finances, too. This is an ideologically driven Budget by a party that simply wants to cut the size of the state, no matter who gets in the way. The truth is that the Conservatives have the youngest, the oldest, the poorest, the weakest and the most vulnerable in their sights. The nasty party is back—only this time they brought along their mates. Shame on them. Both parties have broken their promises; now they want to break Britain too, and we will fight them all the way.

[Several hon. Members]

rose—

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[Danny Alexander]

No, I want to press on.

Thirdly, this is a Budget for fairness. Fairness underpins this Budget, and fairness runs throughout this Budget. This is the first Budget to include an analysis of the distributional impact of its measures. It shows that overall the richest will contribute most to deficit reduction, and it will have no measurable impact on child poverty by 2012-13. That is a good start, and of course we will take further action to underpin fairness on future occasions and in future Budgets. It is important to stress to the House the fact that the principles that have shaped the Budget will also shape the decisions that we make in the spending review, too.

As my right hon. Friend the Chancellor said, this is a progressive Budget. It is a Budget that takes almost 1 million of the lowest-earning income taxpayers out of income tax altogether—that is progressive. It is a Budget that locks in an annual increase in the state pension in line with earnings, prices or 2.5%, whichever is highest, to the benefit of 11 million pensioners. That is progressive, too. It is a Budget that increases capital gains tax rates by 10% for higher rate taxpayers, but keeps it the same for basic rate taxpayers. That is progressive. It includes a radical programme of welfare reform to focus support on those most in need. The welfare bill has ballooned from £132 billion 10 years ago to £192 billion today. If we ignore the economic and social pressures caused by this system, we will only put the whole country and the front-line services on which we rely under even greater financial pressure in future. The Government will tackle that situation head on, including through the reforms in the Budget to the disability living allowance, housing benefits, and the uprating of benefits. As my right hon. Friend the Secretary of State for Work and Pensions said, these reforms will ensure that help is targeted on those most in need.

[Yvette Cooper]

Will the right hon. Gentleman give way?

[Danny Alexander]

I will not give way. The irresponsible Opposition, when in government, caused many of the problems that we face today. We have heard accusations from them today that the measures we announced in the Budget are unfair. Let me test that accusation. The previous Government uprated pensions by 75p. That is not fairness. We have reintroduced the earnings link as our first action—that is fairness.

[Yvette Cooper]

Will the right hon. Gentleman give way?

[Danny Alexander]

I will not; I must press on.

The previous Government abolished the 10p rate of income tax. [Interruption.]

[Danny Alexander]

That is not fairness. We have taken nearly 1 million people out of income tax altogether. That is fairness. The previous Government left an open door for the highest earners to exploit the gap between the rate of capital gains tax and the top rates of income tax, costing the taxpayer £1 billion a year. That is not fairness either. We have raised capital gains tax for higher rate taxpayers, and only higher rate taxpayers, by 10%. That is fairness.

[Yvette Cooper]

rose—

[Danny Alexander]

I will give way to the right hon. Lady.

[Yvette Cooper]

I thank the right hon. Gentleman for giving way. Will he confirm that pensioners will pay hundreds of pounds a year in VAT as a result of his VAT hike, but he chose not to include them in his increase in the personal allowance?

[Danny Alexander]

I thought that the right hon. Lady was going to do better than that. We have relinked pensions to earnings after 13 years. She failed to answer the question from my right hon. Friend the Work and Pensions Secretary earlier about the uprating she had planned, which was less than ours even in the second year.

We should compare the Opposition’s denial that there is a genuine economic need to tackle the deficit with our decisiveness, taking the action on the deficit that we all know is necessary. Compare their complacency with our responsibility. Compare their legacy of ruin in the public finances with our approach of fairness as we take steps to clean up the mess that they left. Compare their obstinate refusal to take unilateral action in introducing a banking levy with our resolute leadership, which not only delivered a levy but brought France and Germany along with us too. The Opposition would have us living in denial. Their approach to the deficit seems to be see no deficit, hear no deficit, speak no deficit. One Opposition Member even told us in today’s debate that they believed the deficit was a fantasy. It is such self-indulgence and complacency that led us into the mess we are in. The way that they got us here is not the way out.

This is a Budget for responsibility, it is a Budget for freedom and it is a Budget for fairness. It is a coalition Budget, and I commend it to the House.