Rt Hon Lord Lilley

    Mr. Darling On the contrary: the Government are introducing a system that will be much simpler than the present one, because indexation is being phased out. We are ensuring that there is a tapered system, which means that, the longer an asset is held, the less tax is being paid.
    I am surprised that Conservative Members are being a trifle critical. Only a week before the Budget, the shadow Chancellor said that he favoured moving to a capital gains tax system that would be based on a tapered system, holding assets for, say, 10 years. If he backed it a week before the Budget, I would be surprised if the Conservative party had changed its position only a few weeks after the Budget.

    Mr. Peter Lilley (Hitchin and Harpenden) The right hon. Gentleman will want to make it clear to the House that, when I made that suggestion, I set two conditions. The first was that it was a genuine simplification that resulted in the end of indexation, and secondly, that, with the end of indexation, the final rate for long-term gains would be 0 per cent. The Chief Secretary’s system creates a tax on increases which merely compensate for inflation. It is a wealth tax by the back door. Does the right hon. Gentleman agree?

    Mr. Darling The right hon. Gentleman has shifted his ground remarkably from his position before the Budget. Before the Budget, he was anxious to make a mark. People were saying that he had not been saying very much. He went into print, and made a speech, which was reported in the Financial Times. He made it clear that he wanted to examine scrapping indexation and replacing it with a capital gains tax charge related to the time that an asset had been held. That is precisely what we are doing.
    The point of detail that the right hon. Gentleman raises is one for the Standing Committee that will consider the Bill. If he deigns to join it, no doubt we shall hear from him. The principle of introducing a capital gains tax that is based on the time an asset has been held is absolutely right, and is widely supported. Once the indexation system is phased out and we move to a tapered tax, the system will be far simpler, and it will encourage people to hold on to assets in the long term. I am sorry that, once again, the Conservative party is in isolation from the vast majority of people who have welcomed a useful tax reform.