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Finance Bill

This feature of the Bill is a classic example of what a Government do when they are driven by political considerations rather than the overall requirements of the economy. At the Conservative party's autumn conference in September of last year it put forward a series of proposals on taxation in anticipation of a possible general election—of course, none of them went any way to helping people who had been adversely affected by the doubling of the 10p rate, but we will come to that later. The Government felt they needed to respond to the Conservatives' apparent seizure of the initiative and as a result the Treasury was thrown into an exercise. That process may have lasted only a couple of days but, in that time, the Treasury went from having a blank sheet of paper to drawing up a series of taxation proposals that would have a deep and significant effect on business and on our economy. My party has a different view from that of the other parties in this House on how much money capital gains tax should raise and what its role should be in relation to other forms of taxation. The parallel that my party draws is between the taxation rate paid by people who are taxed on their capital and the rate paid by those who are taxed on their income. I am extremely supportive of wealth creation; we need an economy that generates prosperity so that people can prosper in their private lives and so that we can afford to fund key public services. However, it offends the sensibilities of the Liberal Democrats party and many millions of people throughout the country that there are people in Britain, who work in private equity and the like, who pay a much lower marginal tax rate than the people who clean their offices. In our view, that cannot be right. Our starting point is that capital gains should be taxed at the same rate as income, as was the case under Nigel Lawson when he was the leader of the Thatcherite vanguard in the 1980s. This is hardly a particularly left-wing policy; it is entirely in tune with what other Governments have proposed in the past. The danger otherwise is that people with good accountants who are able to convert their income into capital will pay considerably less as a share of tax, and we will effectively create a two-tier system: one for those who are taxed on the money they take home at the rates we will now have to get used to—20p and 40p, with national insurance contributions in line with that—and another for those who enjoy much more favourable rates of taxation, despite having considerably higher earnings.