Labour target William Hague over Lord Ashcroft tax row

Labour went on the offensive against William Hague today in the row over Lord Ashcroft's "non-dom" tax status.

The shadow foreign secretary faced questions over assurances he had given 10 years ago, as the then Conservative leader, that the major Tory donor was prepared to pay "tens of millions" more in tax.

Lord Ashcroft, the Conservative Party's deputy chairman, revealed this week that he had in fact been non-domiciled for tax purposes for the past decade.

Harriet Harman, Labour's deputy leader, challenged Mr Hague in the Commons today about what had happened to the extra taxes that had been promised.

"The shadow foreign secretary stands here without a shred of credibility," she said.

Insisting Mr Hague and Lord Ashcroft could not "both be right", she added: "One of them must go."

Mr Hague, deputy in all but name to Tory leader David Cameron, accused Labour of being in a "desperate panic".

He also attacked Labour's record on funding, telling her: "People in glass houses shouldn't throw stones."

Mr Hague became central to the row after The Guardian published details of letters between him and then prime minister Tony Blair from 1999 and 2000.

In a letter following the political honours committee's 1999 refusal of Lord Ashcroft's nomination for a peerage, Mr Hague acknowledged that one reason for their decision was that "Mr Ashcroft was a tax exile".

He confirmed that Mr Ashcroft was "non-resident for tax purposes" but told Mr Blair: "He is committed to becoming resident ... This decision will cost him (and benefit the Treasury) tens of millions a year in tax yet he considers it worthwhile."

Justice Secretary Jack Straw insisted the Tories still had questions to answer about what Lord Ashcroft had promised during the wrangling over his peerage.

"He talked about permanent residence, he talked about the fact that he was going to instruct his advisers accordingly - I assume he meant his tax advisers," Mr Straw said.

"And then William Hague goes out and says this decision will cost Lord Ashcroft millions of pounds.

"The questions are for William Hague. What did he take from the undertakings that were made by Lord Ashcroft? Did he take those undertakings to mean what everybody else took them to mean, which was that Lord Ashcroft would become a permanent resident and therefore be domiciled and resident and paying tax on all his worldwide income in the UK?

"Or were these specially constructed weasel words designed to dissemble and to confuse both Sir Hayden Phillips - who is not a tax expert - and the independent appointments commission for the House of Lords?"

Mr Cameron insisted today that the issue about Lord Ashcroft's tax status had now been "sorted" and accused Labour of hypocrisy.

Interviewed on talkSPORT radio, Mr Cameron said non-dom status was common in many walks of life, including banking, the legal profession and the health service.

He also pointed out that the Tories had pledged to levy an annual charge on all non-doms.

"Let's get it in perspective," Mr Cameron said. "We are talking about 1% of our donations over the last year. Labour have had large donations from people like Lord Paul, Ronald Cohen.

"The Prime Minister made Lord Paul a privy councillor, one of the highest offices in the land.

"There has been a lot of hypocrisy about this. The key issue is what undertakings did this guy have, what tax status did he have?

"They have been answered. So as far as I am concerned, this issue has now been sorted."

According to The Guardian, the chairman of the Public Honours Scrutiny Committee, Lord Thomson of Monifieth, told Mr Blair in 1999 that the tax status of Mr Ashcroft, as he then was, "seems central" to the question of whether he should be ennobled.

Lord Thomson's widow said last night that her husband, who died in 2008, later regretted eventually giving his approval, as he felt Lord Ashcroft was "not a suitable man to be a peer".

The Liberal Democrats called on HM Revenue and Customs to conduct an inquiry into whether Lord Ashcroft's commitment to take up "permanent residence" in the UK was compatible with his status as "non-domiciled" for tax purposes.

The party's home affairs spokesman Chris Huhne, who estimates that the non-dom status has saved Lord Ashcroft around £127 million over 10 years, asked HMRC chief executive Lesley Strathie to investigate whether he should pay any back taxes.

The latest daily poll for The Sun showed the Tory lead over Labour dropping by two points to 5% since Lord Ashcroft's surprise announcement on Monday that he did not pay UK tax on his overseas income.

The YouGov survey put the Conservatives on 38% (down one point), Labour on 33% (up one) and Liberal Democrats on 16% (down one) - a result which could make Labour the biggest party in a hung parliament if repeated in the election.

The Cabinet Office yesterday said that former Clerk to the Crown in Chancery Sir Hayden Phillips had reached an agreement with Tory chief whip James Arbuthnot in 2000 about the interpretation of Mr Ashcroft's undertaking, concluding that his promise to take up "permanent residence" meant he would be a "long-term resident" in the UK.

A Cabinet Office spokesman said: "This was not about tax, this was about residency."

But Sir Hayden told The Times today: "I was in no position to confirm whether or not he would or would not meet the commitments he had entered into. Nor was I in the business of interpreting what those commitments meant."