Capital Gains Tax (Rates)

Baroness Clark of Kilwinning Excerpts

Monday 28th June 2010 Commons Chamber

[Katy Clark (North Ayrshire and Arran) (Lab)]

Thank you, Mr Deputy Speaker. I warmly welcome you to your position.

I congratulate the hon. Member for Pudsey (Stuart Andrew) on an eloquent maiden speech, as well as the hon. Members for Maidstone and The Weald (Mrs Grant), for East Surrey (Mr Gyimah) and for Thurrock (Jackie Doyle-Price), who also made excellent maiden speeches today. My hon. Friend the Member for Airdrie and Shotts (Pamela Nash) clearly knows her Labour history. A number of strong Labour women have represented her constituency in the past, and she showed today that she will be a powerful advocate for the community that she represents. She mentioned in her speech that her constituents have not forgiven the Conservatives for what they did in the 1980s. In my constituency, North Ayrshire and Arran, that is what I was told repeatedly during the general election.

As I listened to the debate today and as I have listened to the rhetoric from the Conservative party over the past few weeks, it reminded me of the 1980s. Fortunately I was a little older than my hon. Friend at the time. When I left school I knew nobody between the ages of 16 and 25 who had a job. Education or the youth training scheme, as it was then, were the only opportunities available. It was astonishing to hear again after 20 years the talk about getting “on yer bike”. For most people in areas such as the one that I represent, moving is not an option. For all the reasons that have been set out today, if we see the kind of attacks on our benefit system that are being outlined, that will become even less of an option.

My hon. Friend the Member for Garston and Halewood (Maria Eagle) described in detail how the changes in the benefit system would have a disproportionate effect on some of the poorest in society. The Budget is deeply regressive and will be devastating for some of the poorest communities and some of the poorest people in the country. However, it will also devastate the economy, because it is a depressive Budget. The rise in VAT, the cuts in benefits to some of the poorest in society and, perhaps even more significantly, the huge cuts in public spending will drain huge amounts of money from the economy. In other parts of Europe, more and more Governments are taking an increasingly similar approach, and that is very worrying for not just the British economy but beyond, because it does not seem obvious where we will be able to sell our goods. So this is a very dangerous Budget.

I have already said that the current debate is reminiscent of debates that took place in the 1980s. In 1979, a Government were elected saying that they had no plans to increase VAT, but not long after there was an increase from 8% to 15%; and now, of course, one of the first steps that we see is a significant increase in VAT. Until the past few weeks I had never heard it argued that increasing VAT was anything other than a regressive policy that would disproportionately affect some of the lowest earners in society.

[Mr Anderson]

I remember a similar situation. Does my hon. Friend remember also that in the 1980s people continually said, “There is no alternative”? Now, the code for that is, “This is unavoidable”, and it is sad that the Liberal Democrats have been taken in by the Conservative party. The Lib Dems are the real dupes in this House.

[Katy Clark]

I agree. I listened with care to the hon. Member for Solihull (Lorely Burt), who basically said that we could not afford the benefit system and, therefore, it was necessary to take these steps, but the House must remind itself again and again that we are a hugely wealthy country. We have the fifth wealthiest economy in the world, but the wealth and power in society are unevenly distributed, and that has to be the backdrop whenever we have these discussions.

Given the proposals that we have heard, this Budget simply seems to be a Tory Budget. I appreciate the Liberal Democrats’ points about the policies that they have tried to inject, but overall the Budget will disproportionately affect those on the lowest incomes. A few days ago the TUC commissioned a paper, which states that overall the annual loss in income and services for the poorest 10th of households is estimated to be £1,514, which is equivalent to 21.7% of their household income. The average annual loss for the richest 10th of households is estimated to be £2,685, which is equivalent to 3.6% of their overall income. No doubt a lot of work will be done on those figures, but we must consider them when we discuss not only the Budget, but the Finance Bill, which we will debate over the coming weeks.

I agreed with the hon. Member for St Ives (Andrew George), and I fully appreciate the difficulties and stress that Liberal Democrat MPs in his position must feel if they have always argued that a VAT increase would have a disproportionate impact on the poorest in society. I hope that we see some detailed work on the impact of not just the VAT increase, but all those policies on the poorest in society.

In reality, we are seeing unprecedented cuts in spending on public services, but I find it difficult to believe that any Government of any political colour will be able to make the proposed reductions, because we are talking about departmental cuts of about 20% to 25% over five years. It is difficult to imagine that the Government will be able to deliver on that, because these are such savage cuts in the services that all our constituents rely on.

This is a bad policy not only because it disproportionately affects some of the lowest-paid and lowest-earning in society, but because it risks choking off the recovery that is so vital to us all. My hon. Friend the Member for Coventry North West (Mr Robinson) was absolutely right—we needed a Budget for jobs and growth, but we have something completely to the contrary.