Labour’s decision to abolish non-doms is tactically astute but strategically risky

by Samuel Dale

There are 116,000 individuals resident in the UK but not domiciled here.

It means they pay no UK tax on their overseas income as their permanent home is judged to be in another country.

High profile non-doms include HSBC chief exec Stuart Gullliver, Tory peer Lord Ashcroft and Roman Abramovich.

Labour wants to restrict the maximum temporary resident status to two or three years. The only restriction today is to pay a £30,000 charge when a non-dom has been UK resident for seven years.

It’s good policy for three reasons.

Firstly, it is morally justified that everyone plays by the same tax rules.

Non-don rules are arcane, unfair and widely abused.

Business people support the change too to level the playing field – notably Dragon’s Den’s Duncan Bannatyne who signed a letter to the Telegraph last week but has switched his vote to Miliband after the move. That’s a big endorsement.

Secondly, it should raise some revenue although it is highly uncertain.

Some tax lawyers say up to £1bn, Labour says hundreds of millions and the IFS says it will raise more than zero.

And, incredibly, Labour will use the extra cash towards the deficit. Hallelujah! Even though it’s a tiny amount it is the first time in months a tax rise hasn’t been immediately spent elsewhere.

Thirdly, and in an election battle this is the most important, it’s politically astute.

I was convinced George Osborne would simply adopt the policy, claim it as his own and move on. The Crosbyite focus on the long-term economic plan has ruthlessly removed distractions.

Cameron pledged not to rise VAT last month while Osborne used the Budget to shoot every Labour fox out there from “1930s spending” to “falling debt”. Except non-doms.

I’m not sure why he didn’t do more on non-doms in the Budget. The issue was thrust back into the spotlight by HSBC’s Gulliver and the Swiss tax evasion scandal.

Osborne has also raised hundreds of millions more from non-doms so why not go further?

He’s had two bites of the cherry to kill this Labour line and he hasn’t. A rare misstep for a well drilled campaign.

Instead there is the confused message that Labour are only “tinkering” yet risking the catastrophic loss of revenue. It can’t be both.

So great move. Or is it?

What will a swing voter think when they read about the policy today?

Labour bashing the rich again and the Tories defending the rich again. So more if the same with pre-existing prejudices re-enforced.

But more importantly I fear undecideds will see it through the prism of Labour raising taxes again. Already Miliband is raising tax on wealthy pension savers, £2m+ homes, hedge funds and now non-doms.

Individually they are fine policies but collectively they set a dangerous mood: bash the rich. There is no counterpoint about attracting investment or helping the squeezed middle (remember that?).

When people read about the complex issue of non-doms it will feed into the narrative that Miliband’s first instinct is to bash the rich and business.

No one will remember this policy in the voting booth, just the mood it sets.

Miliband believes he can win from the left but with the SNP rampant he needs English 2010 Tory voters more than ever. The moderates.

It all comes back to the 2005 general election when the Tories had popular policies on immigration, welfare and tax cuts. But when the voters put them together they saw a dangerous right-wing agenda and rejected them comprehensively.

I fear today’s electorate see Miliband in a similar way.

The announcement on non-doms is great policy but it comes at a price. It simply re-enforces swing voters’ overarching fear of a left-wing, tax-raising Miliband premiership.

Sam Dale is a financial and political journalist

Tags: , , , , , ,

3 Responses to “Labour’s decision to abolish non-doms is tactically astute but strategically risky”

  1. Tafia says:

    If they are so arcane and unfair, why did Brown (ably assisted by Balls) continue with them. And why only a couple of months ago was Balls opposed to abolishing the status.

    Are we witnessing a ‘Damascene Moment’ – or are we really seeing Miliband imposing things on Balls against Balls’s will and judgement?

  2. Robert says:

    This article was good at the start but then got depressingly more negative. Sam seems to see mildly progressive taxation as rampant Trotskyism.

  3. Henrik says:

    It’s yet another manifestation of the peculiar Labour idea that money is something the government allows the electorate to have, after an arbitrary percentage has been retained in the public purse. Tax is somehow noble and virtuous and public money is the government’s as of right, rather than a necessary evil, a compulsory service charge paid to the government as a service provider to the nation.

Leave a Reply