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Capital Gains Tax (Rates)

Part of the debate – in the House of Commons at 3:45 pm on 23rd June 2010.

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Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Marine and Natural Environment) 3:45 pm, 23rd June 2010

Indeed. Those two legs have been put in place already, but Sweden and Canada actively used both of them during the period of the cuts in order to make the cuts work. We can no longer do that, and we certainly do not have economic growth.

I put that to the Chancellor in this Chamber on two occasions last week. On the first, he dealt with what I said as a purely party-political matter, and swatted me down. I understand: we do that in this place. On the second occasion, however, he did not have an answer, saying merely that this was a matter of judgment-and that is what I am worried about.

This is a very important issue. All our funding for health, education, social services, local authorities, transport, and the attack on poverty is entirely dependent on one big macro-decision about how we go forward from this recession. If the coalition Government are right, I say good luck to them: they will get my praise in one, two, or five years. However, if they are wrong-and no one on the coalition Benches is willing to accept that there is even a scintilla of a possibility that they could be wrong-they must recognise that some people told them so in advance, and with good reason.

The scenario may have been different in the 1980s, but we saw the effect that the approach adopted by the Government had then. We saw it in a very personal way, as friends who used to have jobs became unemployed. They would knock on our doors asking to clean windows or do other odd jobs just to make ends meet. We knew what was happening, because our children went to the same schools, and that is why I ask the Government please to accept that there is an alternative.

What do others say? Economic commentators such as Will Hutton, Paul Krugman and David Blanchflower have all pointed out that the proposed cuts are about twice as extreme as those undertaken in Canada and threaten the recovery. The cuts seem to be motivated not by a good examination of the alternatives, but by ideology.

I return to my opening comments to the hon. Member for Bournemouth East. The Financial Times suggests that the emergency Budget will affect Wales-my home patch-disproportionately. I know that. As many as 50,000 to 60,000 jobs could be lost in the public sector, but that is not all. The knock-on effect of the loss of between 50,000 and 60,000 public sector jobs, in my constituency or in that of my hon. Friend Owen Smith, will be the loss of jobs in the private sector and the loss of retail confidence. High street shops will go and the bottom will be knocked out of our communities. Unemployment, and regional inequality, will grow and grow.

Will Hutton points out:

"No country has ever volunteered such austerity. It is as tough a package of retrenchment as the IMF imposed on Greece, a country on the brink of bankruptcy."

He noted that it took Sweden three times as long to carry out the same level of cuts as the UK coalition Government want to impose.

The economist David Blanchflower noted that the effects of the Budget will hit young people disproportionately, and that a double-dip recession is almost inevitable. A double-dip recession is the spectre in the room-a Government Member urged us not to use that phrase but it would be remiss of me not to mention it. Of the forthcoming comprehensive spending review, David Blanchflower says:

"If the young are first, I fully expect the disabled, the old and the weak to be the next target."

There is an alternative way forward and I genuinely ask the Government to consider it. Will they also consider a new version of the Tobin tax, or Robin Hood tax-much derided for many years? It is good to see a bank levy, but it could have been more ambitious. An open letter to the Chancellor was signed by many Members, including our Green party representative, Caroline Lucas, Welsh MPs, cross-party civic organisations, Save the Children Wales, Christian Aid Wales, the secretary of the Public and Commercial Services Union Wales, the National Association of Probation Officers Wales and GMB Wales. It states:

"We are pleased that you support a bank tax, but a truly ambitious bank tax would mean those with the broadest shoulders bear the brunt of the cost of the economic recovery, whereas a rise in Value Added Tax or premature cuts to public services would hit the poorest hardest."

That letter was genuinely cross-party. Some of the greatest advocates of that approach sat in the Liberal Democrat camp on the Opposition Benches, and we tried very hard to get a signature from a Welsh Liberal Democrat. It seems that the lines about premature cuts are now out of date.

I say to the Government, please be right. We often pull at the emotional heartstrings about the 1980s, but if the Budget damages my communities as I think it will, when there is an alternative, I shall certainly never forget or forgive, and nor will my communities, because we have seen it all before. I hope we are not seeing old-style 1980s Tory cuts. I hope that the measures that the coalition Government say will mitigate the worst excesses for the lowest deciles and quintiles are well judged, but I fear they are not. Why are the coalition Government not even considering an alternative way forward that minimises the risks to communities such as mine?

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