Capital Gains Tax (Rates)

I note also that when the Governor was still an economist, before he converted to being a banker, he signed the famous letter of 364 economists, which he has now, in a piece of classic recantation, given up on. All those considerations point to the fact that events could have been predicted and should have been accommodated. We should not have reached the situation in which we had the Business Secretary proudly telling the House—I still cannot believe this every time I read it:""Those factors drove the economy in terms of demand"—" the factors being monetary policy and devaluation of the pound—""and they will continue to do so."" So, we are to have monetary easing and a continued devaluation of the pound. I do not think that either is remotely likely. He went on:""There is a reason for believing that that is what will happen: the Governor of the Bank of England called for this Budget and has now got it, and he has every reason to understand the need for monetary policy to support recovery."—[Official Report, 23 June 2010; Vol. 512, c. 316.]" Well, over to you, Mervyn, and good luck! It really is absurd. It is one thing to hand over control of the money supply and monetary policy to the Governor. We did that back in 1997, and I think that was a good move. My right hon. Friend the Member for Croydon North (Malcolm Wicks) nods, and I know that he was in agreement with that move. However, it is quite another thing to say, "Look, we are giving up on fiscal policy too; you can have the whole of the economy." When we did what we did, we joked amongst ourselves that we had got rid of one half of economic policy—notably the monetary side—to the Governor and that it would only be a matter of time before he laid claim to and was given the whole of it. Joke though that was, it has come to pass under this Government. That is sad and regrettable. The Work and Pensions Secretary is sincere in what he wants to do, but he has had to absorb many cuts, which will make his job much more difficult, as was brilliantly exposed by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), who spoke for the Opposition. However, it is not just that. The only two sure things about the Budget is that it will increase unemployment and reduce growth. That we can predict, because the Office for Budget Responsibility has told us. Beyond that, the Government refuse to give any distributional analysis. Beyond the second year, we do not know what will happen, except that the OBR has pencilled in some figures for growth that it says are hazardous in the extreme. The Budget is an enormous gamble at the great cost of the working people in this country. It is a gamble based on the assumption that the Governor will increase quantitative easing when he said he would not. Perhaps in some magical way he will take other powers to deal with the fiscal constraints imposed by the Budget, because he can do nothing else. He cannot reduce interest rates much more, unless he wants to reduce them from 0.5% to 0%, or unless he starts shelling money out, which is hardly credible. He said he would not do any of those things, so the truth is that we face a situation in which the future of the country is being gambled. Apart from the good intentions of, and the megalomania that seems to be developing in, the Bank, that gamble rests on three factors: an increase in inventories, meaning an increase in output; an increase in investment; and an increase in private sector activity. Who really believes in their heart that any of those factors can be counted on, especially given that the Government have made the investment route highly unlikely by reducing capital allowances? They are served at the moment by a Financial Secretary who told the Committee that considered the previous Finance Bill that they would reduce such allowances—on nearly all counts, they have been as good if not better than their word. He could see no reason why investment should not be reduced to the cost of amortisation in manufacturing or industrial enterprises. If that is the negative, neutral view of the need for increased investment and output that infuses the Budget, and in particular the crucial elements highlighted by the OBR—it says that there is a need for greater investment and output, and to rebalance exports—we are in for a big let down on that gamble. To take one other example—Sheffield Forgemasters—anybody who has dealt with the Government knows that it is virtually impossible to get money out of a shareholder executive. It is like getting money out of a stone, but the firm reached a conditional agreement. That would have made an enormous contribution to the rebalancing of the economy, including in respect of import substitution, and now those products will come in from Japan, because the arrangement was cancelled. I am afraid that in their tone and their measures, the Government are making recovery immensely more difficult, and we face far from a recovery, but a further period of prolonged deflation.