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Capital Gains Tax (Rates)

Part of the debate – in the House of Commons at 3:19 pm on 23rd June 2010.

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Photo of Tobias Ellwood Tobias Ellwood Conservative, Bournemouth East 3:19 pm, 23rd June 2010

My hon. Friend is absolutely right and makes a powerful point. Let us not forget that we are quibbling-well, not quibbling, but the hon. Lady is making an argument about pretty small sums of money if we consider that this country's total debt is £932 billion. That is a record across Europe, it really is. It currently stands at more than 62% of GDP and is forecast to peak at 70% by 2013-14 and finally to start to fall in 2015-16. This is shocking; it is a cost to the taxpayer to the tune of £43.3 billion in borrowing alone. That is more than the defence budget-an outrageous position to be in. Any business presenting figures like that would be labelled bankrupt.

The OBR forecasts that the UK economy will grow by 1.2% this year and 2.3% in 2011-not what was predicted, as Chancellor said. Unemployment is forecast to rise to a peak of 8.1% this year, while inflation is expected to peak at 2.7% by the end of the year before falling back to the 2% target. What has happened is that we have put in the initiatives to ensure that we keep a cap on unemployment, a cap on inflation and, most importantly, a cap on interest rates. As the markets and financiers agree, if interest rates were forced to go up higher, that is what would lead to the double dip recession.

Let me deal briefly with Europe. The Opposition now claim that we should not look over our shoulder at what is happening in Spain, Portugal or Greece, but I think it is wise to recognise the folly of what would have happened if Tony Blair had had his way when Labour were in power. I am still astonished that it has taken until, I think, last week to close the office of preparation for entering the euro. That is absolutely barmy. It is worth pointing out that if we had wanted to join the euro club, the maximum budget deficit would have been 3% of GDP in any year. In 2009, Greece's budget deficit was running at 13.6%. We came in at 11.2%, so there are some similarities.

It is recognised that the eurozone is in a mess because of trading patterns. After joining the club in 1999, Germany's exports to Greece increased by 133%, and the Germans are no doubt delighted about that. However, Greek exports to Germany increased by only 13%, so the system is one way. Not all those exports have been paid for, and that is probably why Germany feels obliged to help with the Greek debt situation. Part of the problem is also that the Mediterranean countries are not as open as they should be, and skewed the stats in order to join the club in the first place. That is why we were wise to stay out of the eurozone. With such huge fiscal disparities, the 16 economies that share the single currency face a massive reality check. In its current form, the euro could be finished.

Let me turn to specific Budget measures. I am pleased that the Office for Budget Responsibility has been created. I am also pleased by efforts to restore the pension link to earnings. My constituency has many elderly people, as does wider Dorset, and we have called for the measure for a long time. I also want to dismiss a myth from the election campaign that the Conservatives would get rid of winter fuel payments and free bus travel. Such scaremongering was completely out of order, and I am glad to say that the provisions are still in place.

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