Attacking non-doms is good electoral politics and good policy. For proof of both, just ask George Osborne. In 2007, when he was only a boyish shadow chancellor, Mr Osborne effectively shredded Labour’s electoral strategy by announcing a cut in inheritance tax to be paid for by a levy on non-doms. And – lo! – any thoughts Gordon Brown might have entertained of calling an election were shelved. Or so political folklore has it. As Mr Brown’s aide Damian McBride later wrote, the announcement, even from an inexperienced Conservative frontbench, was one of the crucial events that “did shift the media momentum, and hardened the poll deficit in those crucial south-east marginals. They created the climate for GB to wobble when the moment of decision came.”
Any Labour candidate feeling jittery after Wednesday’s pledge from Ed Miliband should remind themselves of that 2007 moment. And their Conservative opponents might remind themselves that their chancellor has repeatedly hit the non-doms for more cash – most recently in the autumn statement put out just before last Christmas. All Mr Miliband has done is go harder and faster after the same rabbit. His pledge to scrap the non-dom loophole altogether may provoke a few party donors who have been non-doms (take a bow, Gulam Noon, Ronald Cohen and Lakshmi Mittal). It will almost certainly prompt taunts that the Labour party is “anti-business”, or hates wealth. But provided it is communicated clearly, it will probably be popular with voters.
And so it should. The non-dom loophole is an anachronism that should have been archived a long time ago. Under this get-out, anyone successfully arguing that their true domicile lies outside this country can spend every moment of every waking day in the UK, enjoying the health service and all the other public services, and law and order – and yet pay far less tax than any UK resident. There is no hard and fast proof they must provide, since non-dom status has no clear legal definition. Bung enough money at a sufficiently ingenious lawyer and you’re in the club. So are over 113,000 of the richest people in Britain today, a list that has included such adornments to the nation as Roman Abramovich and Lord Ashcroft. Non-doms can often legally avoid inheritance tax; and as the HSBC files showed, they are ideally positioned to squirrel their millions away in some private bank.
The usual line parroted by New Labour and Tory politicians alike is that the ultra-wealthy can always go shopping abroad for more generous tax treatment. But it is hard to see what Britain gets out of this elite, apart from watching them bid up central London property. The joys of non-dom status come with no obligation to invest or create jobs. As Richard Bacon, a Conservative parliamentarian on the public accounts committee exploded last month at a representative from HMRC: “You’re surprised that people think there’s one set of rules for the rich people and one set of rules for someone else, when you’ve just told us that’s exactly what there is... No wonder people are pissed off!” Hear, hear.
