Non-doms: If George Osborne wanted to win he would not be defending a tax perk for the rich

The stupidity of his response is matched only by its laziness

John Rentoul@JohnRentoul
Wednesday 08 April 2015 20:34
Ed Miliband believes it fair that the estimated 116,000 non-doms in the UK should face the same tax demands as less wealthy fellow citizens
Ed Miliband believes it fair that the estimated 116,000 non-doms in the UK should face the same tax demands as less wealthy fellow citizens

You know all those people complaining that the election campaign would be about sound bites and superficialities rather than policies? Well, they have not been vindicated so far. First, a substantial speech making the case against a referendum on our membership of the European Union from a Labour former Prime Minister (not a “former Labour Prime Minister”: BBC, please note).

Now a promise to abolish an anomalous, unfair and unjustifiable tax perk for the rich. Sensible Labour policies are rarer than foil holographic Charizard cards, so we should welcome this one enthusiastically even if it is unlikely to raise much money or may even lose the Exchequer some.

Non-domiciled status for tax purposes is a bizarre anachronism and Ed Miliband is quite right to seek to get rid of it. I don’t know the finer points of the relevant law, but that means that I have a head start over most of the politicians and commentators who are talking about it. You need to know only two things: one is that the rules for being a resident of the UK are not the same as the rules for having the UK as your domicile for tax purposes – and that the difference is advantageous to some people. The other is that in some situations non-dom status is heritable. We are talking, therefore, about a hereditary tax-favoured status. How on earth can anyone justify that?

Well, in normal, non-election times, it has survived through a mixture of inertia and pragmatism. The sorts of rich, globally mobile people who benefit from non-dom status add something to the economy, through the taxes that they do pay and the businesses that they run. But that is not a very good reason. London attracts the global rich easily enough without additional perks. Most of them would stay here without the subsidy and might even pay the “hundreds of millions” of pounds in extra tax that Miliband estimates.

What was unexpected yesterday – and this is to stray into questions of process and tactics that so frustrate those who want elections to be a pure debate about the merits and demerits of the parties’ policy proposals – was the disarray of George Osborne’s response. I assumed that Conservative high command would have been working all night, having heard of Miliband’s plan late on Tuesday, to allow the Chancellor to say yesterday morning: “As I said in the Budget, we have been reviewing non-dom status, and I am now bringing forward the announcement of my decision to abolish it.”

But no, the Tory response was confusion, muddle and pedantry. “But Ed Balls said it was a bad idea four months ago,” is not a comprehensive rebuttal. Anything, anything would have been better for the Tories than their feeble and contradictory attempts to say Labour is not really abolishing non-dom status or they had 13 years to do it when they were in government. If Osborne had simply copied Miliband it might have been embarrassing for five minutes but he would not have been left defending a tax perk for the rich.

It is the same mistake he – the supposed genius of political strategising – and Cameron have made before. Non-dom status hardly matters in macro-economic terms. No one knows how much money it raises or costs, just as no one knows whether a top rate of income tax raises more at 45 per cent or 50 per cent. But the political effects are clear. Cutting the top rate of income tax was the defining mistake of this government. It looked like a “tax cut for the rich”: a symbol of the Tories as the party of the comfortable.

Yesterday, for all the who-said-what-when, the Tories defined themselves as the defenders of global tax avoiders. The stupidity of Osborne’s response is matched only by its laziness. The Conservatives do not seem to realise that there is an election on. This is urgent: this is the kind of policy that cuts through. If Cameron and Osborne were as hungry to win as they ought to be, they would have thrown everything at stopping Labour from painting them as the friend of the rich.

What is so extraordinary is that they have a story to tell on equality. The gap between rich and poor has narrowed slightly over the past five years, because the burden of deficit reduction has fallen most heavily on the richest fifth of the population. Trying to make Britain more equal is a huge and difficult task – well beyond the scope of fiddling with the tax system. Yet they casually allow Labour to paint the Tories as soft on the rich and hard on the poor.

If this carries on, the Conservatives are going to lose. Tying with Labour in the opinion polls means Miliband in Downing Street with the support of the Scottish National Party. The early engagements of the election campaign have not eroded Labour’s support. The Tories have to move support their way if Cameron is to stay on as Prime Minister. Yet, when Miliband comes up with a foreseeable policy such as abolishing non-doms, they fall straight into his trap, putting themselves on the wrong side of public opinion.

Cameron has done well on the prepared programme of image-softening, being seen with Samantha, a lamb and a six-year-old girl who put her head on the table. But his team have been unable to respond to Labour unexpectedly setting the tempo.

Policies matter. But some policy debates are so one-sided that the only sensible tactic is to concede and move on.

Miliband and Balls will have more policies like non-doms. If the Tories cannot respond better, they will not deserve to win.

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