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'(4A) The total amount of taper relief which can be claimed in accordance with this section by any one taxpayer in any one tax year shall be limited to £5 million.'.

My colleagues, like the Conservative Members, initiated an extensive debate in Committee on the impact of the taper relief on capital gains tax--

Mr. Fallon: Where were you?

Mr. Bruce: I was ably represented by some extremely talented colleagues. I notice that the shadow Chancellor did not even put in an appearance, so I need no comments from Conservative Members.

There have been developments during the passage of the Bill which justify the amendment and with which the Government will need to deal. Even if the Government do not accept the amendment at this stage, their proposals, as they come into effect, will generate evidence that I suspect will make them wish to return to this matter in due course.

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It has been suggested that, whether it was the intention or not, the capital gains taper will substantially reduce the capital gains burden for many of the very richest people in business, while it will increase the tax burden on smaller business people. I find it quite extraordinary that a Labour Government are deliberately altering the balance of capital gains tax in a way that seriously hits small businesses and enables a large number of extremely rich people to escape the full burden of the tax. The evidence has not been put forward by the Liberal Democrats; a number of independent tax consultants have said that the people who will make the most money out of the measure are tax consultants and, that being the case, they welcome anything that makes the tax system more complex. They believe that it substantially lets off the hook some people in business who are making substantial profits on the basis of the accumulation of the paper value of their shareholding.

A case in point involves the partners of Goldman Sachs. It has been estimated that, under the Government's proposals, they could potentially realise an escape from capital gains tax valued at £500 million. That massive tax concession is being promoted by a Labour Government while, as my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) will wish to make clear, many small businesses will face an increased tax burden.

The Financial Secretary to the Treasury will appreciate that the purpose of the amendment is perfectly reasonable: to put a limit on the amount by which anyone can secure relief in any one year.

Dawn Primarolo indicated dissent.

Mr. Bruce: When I see the Minister shaking her head, I am totally converted to the view that we are in the face of new Labour, which clearly believes that there should be no limit to the tax-free gain that people should be able to make. That differs greatly from the speeches that I heard from Labour Members during 14 of the 15 years that I have been in the House.

As it has been clearly identified by independent tax consultants that the Government proposals will allow many individuals substantial relief from capital gains tax, a limit of £5 million seems pretty generous. The amendment proposes that anyone who makes gains of £5 million in a year will benefit, and the relief will be ended only if the gains exceed £5 million in a year. That seems very reasonable, and most people would regard a £5 million tax gain as more than enough to keep them even for two years. Therefore, in the circumstances, I hope that the Government will respond constructively to a real concern that has been identified, which I would expect a Labour Government to balance with fairness and justice, taxing the rich according to their means and ensuring that the less well-off in business are given a fair return instead of an increased tax burden.

Mr. John Burnett (Torridge and West Devon): The changes that the Government are introducing on taper relief for capital gains tax raise a number of questions, but one is particularly significant.

Hitherto, a gain of up to £250,000 by a small business man or woman would be completely exempt from capital gains tax. The Government's new proposals would bring

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into charge that small gain, so that an individual gaining £100,000 would pay £10,000 in tax and an individual gaining £50,000 would pay £5,000 in tax. Under the old rules, such an individual paid nothing. Let me ask the House to concentrate on an individual gaining £10 million. When the full taper relief comes into force in 10 years' time, that individual will pay £1 million in tax. Hitherto, under the rules that prevailed before this year's legislation, that individual would have paid £3.15 million in capital gains tax. Under the new Labour rules, the tax bill will be £1 million. I have one simple question for the Minister, and I am sure that many hon. Members also wish to know the answer: why do the Government propose to penalise the small business man or woman and give such a bonanza to the very wealthiest?

Dawn Primarolo: It is a shame that the hon. Member for Gordon (Mr. Bruce) was not able to be present in Committee to hear all the debates on the issue. It is also a shame that he seems to have forgotten that when we debated the issue in Committee of the whole House, the Conservatives moved an amendment that would have taken the taper to zero over 10 years, which would mean that after 10 years a gain would be untaxed. The Liberal Democrats voted to a person for that amendment. After that substantial debate--

Mr. Burnett: Will the hon. Lady give way?

Dawn Primarolo: No, I shall not give way. The hon. Gentleman will have plenty of time to explain to the House the apparent changes over such a short period in the Liberal Democrats' attitude--if we are not to assume that they are driven by opportunism rather than principled policy.

After the Liberal Democrats had voted for the taper to go to zero, they moved an amendment that stated that they accepted the taper and the principles of the Government's reform, but they wanted the Government to delay the implementation of the reform for a year.

Mr. Burnett: Will the hon. Lady give way?

Dawn Primarolo: I will not give way to the hon. Gentleman until I have put my case to the House. He has spoken and he can put his case in his speaking time.

The Liberal Democrats misunderstood--or deliberately failed to understand--the purpose of the Government's reform, which is to encourage long-term investment and reward entrepreneurs, while ensuring that everybody pays a proportion of tax, just as the Liberal Democrats say should happen with income tax. The amendment is driven more by newspaper reports than by principles of how capital gains should be taxed.

The amendment is uncalled for and unnecessary. It would undermine the Government's principle that, regardless of gain, a proportion of tax will be paid. The Liberal Democrats have failed to understand the enormous incentives that the reforms give to entrepreneurial activity and growth. I suggest that the House votes against the amendment quickly and that we move on to the next debate.

Mr. Malcolm Bruce: I appear to have touched a raw nerve. The fact that I was not present when the issue was

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debated in Committee is not relevant. I am perfectly capable of reading the transcripts, discussing with my colleagues what went on and determining the argument for the development of policy.

It is clear that even Labour Members were concerned about the implications of the changes and supported the argument--even if they did not vote for it--that there should have been consultation and that a year's delay for that consultation would have been sensible.

Dawn Primarolo: So the hon. Gentleman is in favour.

Mr. Bruce: Of course I am in favour of consultation on an issue of such major concern. It is well known that the Conservatives wanted the headlines for trying to abolish capital gains tax, but could not find a way of doing so without creating the most massive income tax loophole ever envisaged.

Experienced practitioners--it is not a question of newspaper reports--pointed out that the Government had not fully considered the implications of their proposals. The Financial Secretary is digging her heels in to save face because she is not prepared to acknowledge that, had the Government consulted, the proposals might have taken a different shape. As I said in my opening remarks, it is quite unbelievable that a Labour Government are defending the right of fat cats to benefit from a massive tax reduction.

Mr. Burnett rose--

Mr. Bruce: Does my hon. Friend want me to give way?

Mr. Burnett: No, I want to speak.

Mr. Deputy Speaker (Mr. Michael J. Martin): Order.

Mr. Bruce: I was only trying to help my hon. Friend to shorten the debate.

We have put forward a perfectly reasonable proposal that would help the Government out of a potential embarrassment, and we certainly intend to pursue it.

Mr. Burnett rose--

4.45 pm

Mr. Deputy Speaker: Order. The hon. Member cannot speak again except by leave of the House. Is it the will of the House that the hon. Member speaks again? [Hon. Members: "No."] I hear an objection. The hon. Member for Torridge and West Devon (Mr. Burnett) cannot address the House again. The only reason why his hon. Friend the Member for Gordon (Mr. Bruce) was able to speak twice is that he moved the amendment and was therefore able to reply to the debate.

Question, That the amendment be made, put and negatived.

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