ED Miliband has been accused of lurching to the left to win former Labour voters back from the SNP by pledging to strip wealthy individuals of their “non-dom” tax break status.
The Labour leader yesterday vowed to end abuse of the colonial-era loophole by stripping the right to use it from anyone other than those living in the UK for a “brief” period. He dismissed fears of an exodus of wealth and insisted that it was not only morally right to stop the UK operating as a “tax haven” but the reforms could also raise “at least hundreds of millions of pounds”.
Attacking non-doms is a shrewd political move, but the economics of the proposed reforms are unconvincingSimon Walker
He faced Conservative claims the policy was in “chaos” after it emerged shadow chancellor Ed Balls recently suggested that abolition could cost the UK more than it raised as people left the country. London mayor Boris Johnson said the move was part of “an anti-London agenda” as most non-doms who avoid paying tax on all their income live in London.
English Tory MPs claimed the policy was further evidence of the SNP pushing Labour further to the left to save seats in Scotland.
The use of “non-dom” status by long-term residents of this country to protect overseas income from UK taxes – including high-profile figures such as Chelsea Football Club owner Roman Abramovich – has been a controversial political issue since the numbers rose under Labour.
Announcing the policy yesterday, Mr Miliband said it was “a very British value that we all play by the same rules”.
He said: “Why should people be able to enjoy all of the virtues of our great country and not pay tax like everyone else? Why should there be one rule for some people and another rule for everybody else?
“It means higher taxes for working people and business people and starving money from our public services.
“It isn’t fair, it isn’t just, it holds Britain back and we will stop it. The next Labour government will abolish the non-dom rule.”
Former Welsh secretary John Redwood was among Conservative MPs claiming the policy had more to do with the threat to Labour from the left posed by the SNP.
Mr Redwood said: “There is no doubt that Labour are under pressure on the left from the SNP, which is why they are coming out with policies like this and forgetting what worked for them when they were in government.”
Conservative Gosport MP Caroline Dinenage said she didn’t know what the impact would be on the south of England, but also said the policy was a response to the SNP.
She said: “This is all part of the internal wrangling within the Labour Party about what to do but it is also a response to the desperate leftward drag of the SNP and Labour trying to save seats in Scotland.
“The result is a typically ill-thought-out policy which nobody seems to be clear about.”
In a January radio interview seized on by the Tories, Mr Balls said abolishing non-dom status “probably … ends up costing Britain money because there will be some people who will then leave the country”.
Asked by BBC Radio Leeds at the time if he would scrap the status, he said he was looking at tightening the system to “make sure the non-dom rules work in a fair way”.
Mr Balls, who conceded yesterday that the benefits to the Treasury remained “very uncertain” because it was not known how much tax non-doms avoided, said the policy was “exactly” in line with the firmer action he spoke about in January.
“Independent experts have said that the changes we are proposing today – abolishing non-dom status while allowing for genuine temporary residence – will raise revenue,” he said.
Mr Johnson said: “Once again Labour’s hostility to London and its aversion to business is clear.
“Labour want to rip up 13 years of their own policies – their plans are confused and chaotic and illustrate why only the Conservatives can be trusted with business, job creation and the economy.”
Prime Minister David Cameron said Labour appeared “frankly pretty chaotic – on the one hand saying they want to get rid of non-dom status and on the other saying that if they did so it would cost the country money.
“This goes to a bigger issue, which is when you see such confusion over a policy like this, are these people really capable or competent of running an economy?”
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