Capital Gains Tax (Rates)

David Evennett Excerpts

Wednesday 23rd June 2010 Commons Chamber

[Mr Darling]

The Conservatives did so because they thought it expedient, but at the end of 2008, they decided to change tack. In all we heard yesterday, the Chancellor did not explain why, if everything was going wrong and we were spending too much in the previous few years, he was quite happy to support such spending right up until the end of 2008.

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

I am listening with great interest to the right hon. Gentleman’s exposition of what the last Labour Government did. However, if everything is so good, why is our economic and financial position so much worse than those of our competitors after his tenure as Chancellor of the Exchequer?

[Mr Darling]

It is largely because we have a very large financial sector that contributed about 25% of all our corporation tax receipts. When the banking crisis hit, those receipts fell. There is something in the argument that has been advanced on both sides of the House in recent years—although, perhaps in retrospect, sadly not as much as it might have been over the past 30 years —that our economy has become dependent on the financial services sector, particularly on tax receipts. I think we would all like to see that rebalanced. Of course, there is a big question about how we do that, and I cannot for the life of me see how cancelling the help to Sheffield Forgemasters, for example, will go anywhere towards helping that rebalancing. However, I shall come on to that in just a moment.

At the moment, our recovery is fragile. What makes matters worse is that the position in our main export market, Europe, is extremely worrying. I am far less optimistic than I was in March about what is likely to happen in the European Union economies over the next year. Growth in France has fallen back; in Germany, it is pretty flat—just positive; other countries have tipped into recession; and Spain has unemployment over 20% and other well-understood problems. On top of that, whereas the predominant view certainly until the beginning of this year was that we had to support our economies to ensure that we established growth, the Chancellor is right that he can pray in aid the change of view among some of his counterparts, such as in Germany, which is now pursuing policies to reduce the deficit that will impact on demand, not just in that country but within other parts of Europe as well. Germany is our major trading partner. If demand there is suppressed, and if taking large sums of money out of our economy here has the effect I suspect it will have, the result will be reduced demand, which will affect business confidence, its propensity to invest and, therefore, our ability to grow and generate the receipts we need to get our borrowing down. That is a real concern.

There is no doubt that, over the past few months, the balance in the approach has moved away from what one might characterise as the Keynesian towards the more orthodox. I, for one, think that that is a profound mistake.

--- Later in debate ---

[Huw Irranca-Davies]

My apologies, Madam Deputy Speaker, for not welcoming you to the Chair.

My answer to the hon. Lady’s second question is: absolutely not. None of us can resile from the fact that there will need to be not just efficiencies, but cuts and prioritisation of projects and spending, and that will hurt. My fundamental point, which I shall return to in some detail shortly, is about how we do it and when we do it; the timing of it.

I have to say that I could not disagree more with the hon. Lady’s earlier point, and neither could most of the child charities or the Joseph Rowntree Foundation. [Interruption.] Yes, we have had criticism for not going far enough, but I return to the remarks of the hon. Member for Strangford (Jim Shannon) about child tax credits. They can sometimes be complicated. I sometimes have constituents in my office who say, “Can you help me sort this out, because we have letters going back and forth?” I tell the hon. Member for Devizes (Claire Perry) this, however: none of my constituents would do without them because of the material difference they have made to them.

When I send my children to school, I know that if they come home and say they have a trip to go on and it will cost a fiver, a tenner or £20, I can say to them, “Don’t you worry. I’m on an MP’s salary; it’ll be okay.” I also know, however, that there are constituents of every Member in this House who will have to make the choice between putting groceries on the table and putting that money towards things such as school trips. So when the hon. Lady says this makes no difference, I can honestly say to her, “Go and look at the statistics. Go and look at the numbers of those who have been lifted out of absolute poverty under the previous Government.” If she shares this commitment—as I am sure she does—I tell her to put the pressure on the coalition Government to make it clear before the summer what their poverty targets are, and not for two years, but for five years.

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

Will the hon. Gentleman give way?

[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.

--- Later in debate ---

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

May I welcome you to the Chair, Madam Deputy Speaker? I am grateful for the opportunity to contribute to this vital debate, which has been interesting and lively. I congratulate my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) on an excellent, effective maiden speech, and I look forward to hearing more from him in the future. I also congratulate my hon. Friends the Members for The Cotswolds (Geoffrey Clifton-Brown) and for Bournemouth East (Mr Ellwood) on constructive, thoughtful and progressive speeches, which addressed the problems facing our country.

I am disappointed by the hon. Member for Penistone and Stocksbridge (Angela Smith) and some of her colleagues who seem to think that there is a right-wing ideological agenda. The Budget has a practical, realistic approach, from a coalition Government who are determined to get our country out of the economic mess in which the Labour Government left us. We will not forget that, and we will take no lessons from them about the situation in which we find ourselves. Many of us would prefer not to have to take some of the measures in the Budget, but the 13 wasted years under Labour have resulted in a real mess.

I am disappointed that the hon. Member for Ogmore (Huw Irranca-Davies) is no longer in his place, because his was a constructive and passionate speech. I say to him and to Labour Members, including those on the Front Bench, that most of us came into politics to improve the condition of everybody in society, not just one section of it. We are determined to look after the disadvantaged and to help the less well-off, the disabled, pensioners and those in real need, but to do that we must have a strong economy and money to invest in such services. It is regrettable that the Labour party destroyed our economy and the opportunities for many people. I agree with the comment that most Labour Members who have spoken seem to be in denial about the problems that they have created and the situation in which we find ourselves. They keep on with the mantra, “It is a world situation” and so on. Of course, there is a world recession, but it was made worse by the incompetence of the Labour Government and their failure to deal with the issues early enough and to take the necessary measures to ensure that we could weather the storm. The consequences are a disaster for the whole country. History lessons will not do when we have had 13 wasted years.

My right hon. Friend the Business Secretary made a progressive, rational and measured speech and explained to us all his thinking and how he has come to his decisions. We value that, because he has looked at the facts and figures and made a reasonable judgment accordingly. I also congratulate my right hon. Friend the Chancellor on a positive and constructive Budget in very difficult times. It was positive in its aims and objectives, based on fairness and reasonableness, and in its twin approach of dealing with the debt problems and planning for the future.

Having been a Member of the previous Parliament, I also welcome the Chancellor’s candour, openness and clarity about the situation in which the country finds itself. How different this was from Budget statements under the last Government. Those were all spin and propaganda, and Members had to leave the Chamber and read all the minutiae in the small print to find out what they really meant. Yesterday the Chancellor of the Exchequer was open and frank, telling the people about the problems and what needed to be done about them. He did not conceal the facts in the small print or hide them away in other paperwork.

After 13 years of Labour government, our economy has been shattered by mismanagement. We have a huge public debt and great unfairness in the tax system, and businesses, particularly small businesses, feel battered and bruised. We really do need a new approach and a new direction. Yes, the Budget is tough and austere, but it is also necessary and fair, and it is unfortunately unavoidable because of the position in which we find ourselves. We need a decisive breach with the past so that we can build facilities and services for the less advantaged and the most disadvantaged, such as those who are sick and will need more help in the future.

I want to concentrate on enterprise, pensions and training. As a Conservative, I believe passionately in lower taxation, and I am pleased that my right hon. Friend the Chancellor of the Exchequer also aspires to achieve that goal—when the time is right. When the time is not right, we must increase taxation, however hard that may be, in order to balance the books. I know that my constituents will appreciate my right hon. Friend’s approach, because after 13 years of Labour they feel that they have been over-taxed and over-regulated, and that there has been too much bureaucracy and red tape and not enough support for their business activities.

My constituents have experienced the problems of increasing unemployment and economic inactivity, and most of them feel that bureaucracy and taxation have been excessive. Regrettably, those problems must be addressed with vim and vigour. Local business men tell me that central Government support was inadequate during the recession, and that publicly owned banks were unhelpful when they applied for credit or assistance. They were cast adrift by a Government who said wonderful things in the House, but did not follow them up with real measures to help small businesses make the wealth on which our country depends. It was clear that action by the new Government was urgently required to deal with that on all fronts.

The Government have already cut £6 billion of spending because we cannot afford it. If we are to create jobs and growth, it is vital that we help the small and medium-sized businesses that are at the heart of our economy. We need to show that Britain is open for business, and attract firms into the United Kingdom. We need reforms of tax and regulation to make it less costly and bureaucratic to run or start a business. We need to shift the balance in our economy back towards private enterprise, rather than the public sector dependency that we saw during those 13 years of Labour government.

I agree with the hon. Member for Penistone and Stocksbridge that the public sector has a vital role to play, and that it can create wealth and opportunities. Most wealth, however, is created by the small and medium-sized businesses which pay the tax and allow us to spend the money that we need to spend on our vital public services. I am amazed at the increase in public sector pay and pensions over the past decade. We would surely expect the Prime Minister to have a higher salary than anyone else in the public sector, and when we see that people at the BBC and in some local authorities are being paid considerably more by the taxpayer for doing a less demanding job, we have to ask what has gone wrong.

We also need to deal with the problem of waste. The hon. Lady mentioned regional development agencies, an issue that I raised with the Prime Minister at Question Time last week. Although some RDAs have done a good job, others have wasted money in their bureaucratic way. We have heard about extravagances and expenses that have been in no way connected with the job that those people should have been doing, involving entertainment, offices abroad, novelty items or taxis, which were mentioned by my hon. Friend the Member for The Cotswolds. That profligacy is another Labour legacy that I am pleased to see the new coalition Government will take on.

The managing director of a lighting business in my constituency advised me that he thought the support for small businesses during the recession was

“neither adequate nor well advertised.”

He also said that

“there was nothing for a small business in our position or if there was, we didn’t find out about it.”

His business also had problems with the publicly subsidised banks. Higher banking costs were imposed on it, leading to its having to reduce staff to meet the cost of the charges. That is not the way to get a successful business developing and going forward. In addition to the problems in getting Government support and dealing with an over-complicated tax system, that managing director experienced a great deal more red tape and regulation, which in turn increased costs. That was a legacy of the last Labour Government: more regulation, more red tape and more costs.

I also received representations from a car manufacturing firm in my constituency. Its managing director thought the previous Government did a good job with its advertising. However, when it came to applying for assistance, his company found that support was not available. That is a terrible legacy. He said the investment company appointed to manage the capital for enterprise fund for the Government was interested only in venture capital parameters such as high rates of return. The company also alleged that it did not receive support from its bank. In fact, it suffered increased charges from very early in 2009.

Both those businesses will benefit from the measures announced in the Budget. The reduction in corporation tax will mean they have more money of their own to invest in their business, and either to take on new staff or extend the working of current staff. The Budget will bring benefit to small businesses in particular. They will welcome the lowest ever rate of corporation tax, which will fall from 28% to 24% during this Parliament. The tax rate reduction for small companies from 21% to 20% will also be welcomed, and the extension of the enterprise guarantee scheme will provide a real boost for small businesses struggling to get credit.

The Budget therefore contains a lot that is positive, contrary to what was suggested from those on the Opposition Benches, where all was doom and gloom. There is enthusiasm for enterprise to get things moving, which is very important for the future of the country, because we must get the debt down and the public finances under control before we can have economic growth. We must never forget that high levels of debt put an unfair burden on future generations. Our role is to look after the future and make sure that our children and grandchildren are not in hock to debt because we have failed to manage the national finances. This emergency Budget will go a long way to rectifying the situation for the future.

Action to stop Labour’s job tax by increasing the threshold for employers’ national insurance contributions by £21 a week will also be positive. As a result, the number of employees for whom employers pay no national insurance will rise by 650,000. That is another real, positive move to endeavour to ensure that we get ourselves out of the appalling mess we find ourselves in.

The second issue I want to raise is pensions and pensioners. I am delighted that the earnings link is to be restored after 30 years. We have to admit that sometimes the Conservatives made mistakes in government, and it was a Conservative Government who made the mistake of breaking the link. [Interruption.] It is no good the hon. Member for Derby North (Chris Williamson) laughing and smiling, because the Labour Government had 13 years to do something about that, but they did not do a thing. They sat on their hands and made nice noises, but action speaks louder than words. This coalition Government have already taken more action on pensioners than the previous Labour Government did in 13 years.

[Mr Stewart Jackson (Peterborough) (Con)]

Will my hon. Friend remind the House that when we broke the link in 1980 we had an inherited situation of huge debt—an economic basket case—as a result of a Labour Government spending beyond their means. Does he think that that sounds familiar?

[Mr Evennett]

Exactly. My hon. Friend makes a good point. It is history repeating, is it not? I am sure that pensioners in my constituency and across the country will be pleased by the triple lock, whereby the basic state pension will rise by whichever is the higher out of earnings, prices measured by consumer price inflation or 2.5%. That is good news. One would not believe on listening to the Opposition that there was any good news at all in the Budget, but there is. We will never have pensioners getting a meagre increase of 75p on the basic pension, as happened one year under Labour. That was an insult and the pensioners knew it. We will not allow that to be repeated.

[Angela Smith]

I will be one of the first to admit that the 75p increase was a mistake. Will the hon. Gentleman acknowledge that, under the Budget, the means of raising the money to bring in the link to earnings a year early might be raising the age at which women can claim the state pension?

[Mr Evennett]

It is nice to hear the hon. Lady admit that the Labour Government did something wrong. I do not think we have had one word like that today, and I have sat through the whole debate. One would think that Labour Members thought that everything they did was wonderful, but in their heart of hearts they know the truth: there were mistakes. We are endeavouring to rectify those mistakes to make sure that those who are vulnerable, such as the elderly, have the dignity in old age that they deserve, and we passionately support and believe in that.

Fairness is key in the tax changes. Far too many people on low incomes pay too much tax. When I was in this place under the Governments of Margaret Thatcher and John Major, people on low incomes paid low tax, but in the past 13 years, because of the policies of the last Prime Minister, including when he was the Chancellor of the Exchequer, Labour managed to push more people into tax than ever before—people on low incomes who should never have been paying the level of tax they were. Five or six weeks into office, this Government are already taking action in the Budget to deal with the awful situation of people on low incomes having to pay tax.

[Geoffrey Clifton-Brown]

My hon. Friend is making an impassioned and thoughtful contribution. There was no more cruel example of what he has just said than the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) abolishing the 10p tax rate, because that put so many poor people into paying not only a low rate of tax, but quite a high rate of tax, on relatively low earnings. In contrast, my right hon. Friend the Chancellor has taken a significant number of people out of the tax net altogether with this Budget.

[Mr Evennett]

That point is absolutely spot on. The Opposition’s crocodile tears on these issues are lamentable, because they did not do anything in government. They took away the 10p rate, as my hon. Friend has said, and they pushed people on very low incomes into paying tax when that was unfair. My right hon. Friend the Chancellor made it quite clear in yesterday’s Budget that fairness was the underlying key. It was about making sure that everyone pays a fair amount. Those on high incomes will pay more and those on low incomes will pay considerably less. Families, low earners and pensioners have to be a top priority.

In opposition, I was the shadow spokesman on further education and skills, and I believe that training and skills were one of the Labour Government’s greatest failings. Our society needs a well-trained work force who can adapt and take on board challenges, such as those facing small businesses, to make sure that they can get employment and worthwhile involvement in order to make something of their lives. One of Labour’s biggest failings during the recession was not properly investing in skills so that people who lost their jobs could reskill, upskill, retrain or find new jobs.

[Mr Stewart Jackson]

I thank my hon. Friend for giving way; he is being extremely generous. Did he see the figures published today that show the shameful legacy of 13 years of Labour government, which is that one in four of our 18-year old boys is a NEET—not in education, employment or training? That is the record of the previous Government.

[Mr Evennett]

I am grateful to my hon. Friend. It is a lamentable record that almost 1 million young people are classed as NEETs. That is a waste for them and their futures, and for their communities and our economy generally. Those young people have so much to contribute, but they cannot get on in life if they are not given opportunities because they are not trained and do not have the skills. If that is the case, they are unable to do something for themselves, or for their communities and our country generally.

Britain needs to grow stronger out of this recession. It will do so if it can invest in the skills that mean that people can adapt, develop and take advantage of the new jobs and opportunities that are coming along. This Budget will get rid of over-regulation and red tape, and I hope that it will allow businesses to expand and create the jobs that we need.

Regrettably, we are starting from a weak skills base, with 5 million people in this country classed as functionally illiterate and millions more struggling with basic numeracy and literacy skills. Those are really important reminders of Labour’s failure on skills, and they highlight the need for fresh thinking and new ideas. Those are not just figures: we are talking about real people, and we on this side of the House are just as passionate as Opposition Members about providing opportunities for young people to get jobs.

Some of Labour’s skills programmes are not working, with Train to Gain providing public subsidy for courses that some employers would pay for anyway. That does not represent getting value for taxpayers’ money, but the Budget shows that that is something that the Chancellor of the Exchequer and his team are looking at. This Government want to help people, but they also want to make sure that they are getting good value for the taxpayer.

[Richard Harrington (Watford) (Con)]

I thank my hon. Friend for giving way. The House should be aware that, although the statistics show that 550 young people are claiming jobseeker’s allowance in my constituency of Watford, there are plenty of training schemes. However, the problem—into which I am currently carrying out research—is getting young people to go on those schemes. Money is being spent, but I am afraid that that is happening in the usual irresponsible way that was sanctioned by the former Government. As my hon. Friend noted, the important thing is to ensure that the money is spent wisely, but that will require a lot of work.

[Mr Evennett]

I thank my hon. Friend for highlighting the point that I was making with a practical example from his constituency of how things have gone wrong and need to be rectified.

In view of the time and the fact that other people wish to speak, I shall draw my remarks to a conclusion. Yesterday, my right hon. Friend the Chancellor said that this was a Budget to show the world that Britain was open for business again, and I believe that he was right. The measures included in it will ensure that our country and all of its people are on the road—a rapid road, I hope—to recovery and prosperity.

This country has a potentially great future. What we need are the Government and the measures to encourage that development so that we can make progress along that road. I believe that we have that in this new coalition Government. I think that we are on our way, and that this Budget is an important step to ensuring the future progress and success of our economy.