Non-domicile Tax Status

James Murray Excerpts

Tuesday 31st January 2023 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I beg to move,

That there be laid before this House, no later than 28 February 2023, a copy of the Treasury analysis related to the effect of the abolition of the non-domicile tax status on the public revenue referred to by the Chancellor of the Exchequer in evidence to the Treasury Committee on 23 November 2022 together with any other document or analysis relating to that matter prepared for the Chancellor’s consideration since 14 October 2022.

Today, 31 January, is of course the last day for people across the country who pay taxes by self-assessment to file their returns and make any payments. In a very small number of cases, those tax returns will have been submitted by people who are claiming tax benefits because of their non-dom tax status. That loophole is well known to some of the current occupants of Downing Street; indeed, some of them may still have that status and hope to benefit from it again in future.

The loophole allows a small group of high-income people who live in the UK to avoid paying tax on their overseas income for up to 15 years. It is a status that can be passed down through people’s fathers. It costs the public finances £3.2 billion a year and it fails to support economic growth in the UK. It is a 200-year-old loophole that should have no place in our modern tax system.

[Rob Butler (Aylesbury) (Con)]

If it is such a long-standing loophole, as the hon. Gentleman describes it, why have successive Labour Governments not abolished it?

[James Murray]

We are debating the importance of a fair tax system for the future of this country. This Government have sat on non-dom tax status for months and years. We are questioning why this Prime Minister is not heeding Labour’s calls to abolish the non-dom tax status once and for all, and spend the money on the NHS, childcare and a growing economy.

When the Government are making working people pay more tax, it is simply wrong to allow wealthy people with overseas incomes to continue to benefit from an outdated tax break. It is also bad for UK business. The loophole prevents non-doms from being able to invest their foreign income in the UK, as bringing it here means that it becomes liable for UK tax. That is why the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), first set out our party’s position last April—four Conservative Chancellors ago. She confirmed that, in government, Labour would abolish the non-dom status as part of our reforms to create a fairer tax system for working people. We will abolish that indefensible 200-year-old tax loophole and introduce a modern scheme for people who are genuinely living in the UK for short periods.

Labour believes that, if a person makes Britain their home, they should pay their taxes here. That patriotic point should be accepted on all sides of the political divide, yet Ministers in this Government, under this Prime Minister, seem desperate to defend the non-dom loophole. What is it about the current Prime Minister that makes him so reluctant to abolish non-dom tax status? The Government are increasing taxes on working people, businesses are struggling, and our NHS is in crisis. Yet the Conservatives defend a small number of rich people who use non-dom tax status and offshore trusts to wriggle out of paying taxes here in Britain.

We know that the Prime Minister understands how non-dom tax status works—he can hardly claim ignorance on that—so how can he possibly justify it? How do Conservative MPs look their constituents in the eye and tell them that their taxes will keep going up, while the taxes of non-doms must always stay down? It is indefensible, and that is why the next Labour Government will act by abolishing the non-dom tax status.

[Anthony Browne (South Cambridgeshire) (Con)]

The hon. Member asks what makes this current Prime Minister reluctant to change non-dom tax status, but what made Tony Blair and Gordon Brown, the former Labour Prime Ministers, also very reluctant to scrap the non-dom tax status? They both reviewed it and both kept it.

[James Murray]

We were not increasing taxes on working people when we were in government. The hon. Gentleman can start looking at the record 13 years ago, but it is high time that Members on the Government Benches took responsibility for what they have done in government—for the low growth, for the high taxes on working people and for the fact that our public services are crumbling.

[Matt Western (Warwick and Leamington) (Lab)]

On that point, to recall what happened in 2010, one of the first things that the incoming Conservative coalition Government did was to increase VAT from 15% to 20%. Who did that hurt?

[James Murray]

As my hon. Friend reminds us, increasing taxes on working people has long been a hallmark of the Conservatives. That has led us to a situation where we have the highest tax burden on working people in more than 70 years.

[Anthony Browne]

Will the hon. Gentleman give way?

[James Murray]

No, I will make some progress. Our position contrasts with that of the current Government, whose Ministers have been at pains over the past year to protect this unfair loophole. When the Chancellor told the Treasury Committee last November that he wants

“to make sure that wealthy foreigners pay as much tax in this country as possible”,

his words could not have rung more hollow. They rang almost as hollow as the Prime Minister’s promise when he took office that he would run a Government of “integrity, professionalism and accountability.” The truth is that the Prime Minister is running a Government without even basic competence and it is hitting people across this country.

[Anna McMorrin (Cardiff North) (Lab)]

It is reported today that Infosys, the Indian-based IT firm, which holds several contracts with public services here, is in a £20 million dispute with His Majesty’s Revenue and Customs. Whether it is through non-dom status or something else, it costs our country dearly when there are tax avoiders. Does my hon. Friend not agree? I am sure that the Prime Minister knows that company very well.

[James Murray]

I thank my hon. Friend for drawing attention to the impact that tax avoidance has on the public purse and on people across this country and to the fact that the Prime Minister probably understands some of these issues very well indeed.

As my hon. Friend set out, people are feeling the impact on this country’s economic growth as we lag so far behind other countries around the world. People are feeling the impact of so many parts of our public services breaking at the seams, and people are feeling the impact as the big challenges of the future get kicked ever further into the long grass.

We need a Government with a plan to grow the economy, with the drive to get ahead of the challenges of the future and with the determination to reform and strengthen our public services. Nowhere is that clearer than with the NHS, as more than 7 million people wait months and even years for treatment, unable to work or to live their lives to the full. We know that, to make the NHS fit for the future and able to support a healthy society and economy, it desperately needs reform and sustainable funding from a growing economy.

[Harriett Baldwin (West Worcestershire) (Con)]

The hon. Gentleman is making a typical, anti-aspirational socialist rant straight out of the book called “Politics of Envy”, but he is not actually speaking to the motion on the Order Paper. Why has he put “28 February” in that motion when he could just wait for the Budget on 15 March?

[James Murray]

It would only be a Conservative MP who could criticise an Opposition shadow Minister for suggesting that people should pay their fair share of tax.

I was speaking about the NHS, so let us look at the Government record on the NHS and see what can be done. We know that, after 1997, Labour’s reforms and funding from a growing economy meant that our country had an NHS of which we were proud. If we win the next general election, as my hon. Friend the Member for Ilford North (Wes Streeting) the shadow Health Secretary has set out, one of the first steps we will take to get the NHS back on track is to use some of the money raised by scrapping non-dom status to implement a workforce plan that addresses the root cause of the crisis the NHS is in. Under our plan, we would double the number of medical school places to 15,000 a year. We would double the number of district nurses qualifying each year. We would train 5,000 new health visitors a year. We would create 10,000 more nursing and midwifery clinical placements each year.

[Harriett Baldwin]

On a point of order, Mr Deputy Speaker. Is it in order for the Opposition spokesman to be talking in such general terms about a wide range of things, without actually addressing the motion on the Order Paper?

--- Later in debate ---

[James Murray]

Thank you, Mr Deputy Speaker, for the opportunity to set out the details of the kind of long-term workforce plan that we believe the NHS needs.

The NHS is one of the great challenges we face, but we know another challenge that parents and children across the country face: the desperate need for a modern childcare system. We need a system that supports families from the end of parental leave to the end of primary school, as the shadow Education Secretary, my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson), has set out. As the first step in this landmark shift, we would use revenue from abolishing non-dom tax status to guarantee breakfast clubs for every primary age child in England. Too many families cannot afford the clubs before school that boost children’s learning and development and help parents to go to work. Labour’s plan would save families money as well as help parents to work the jobs and hours they choose.

Our plan to abolish non-dom status, replace it with a modern system and use the money raised to strengthen the NHS, childcare and the economy should be a no-brainer. Yet the Conservatives refuse to do it. We want to know why. This is not the first time I have asked Ministers to explain their position. In the last few months of last year, I asked Treasury Ministers five times to explain why the Government have been so reluctant to abolish this outdated tax loophole. I asked Ministers five times whether the Chancellor considered abolishing non-dom tax status, whether the Prime Minister was consulted about doing so and whether, when the current Prime Minister was Chancellor, he recused himself from discussions on the matter.

Five times I asked those questions; five times the Ministers refused to answer or even acknowledge them. Instead, Ministers have been determined to defend non-dom status. I suspect we will hear some of those same defences today. If previous debates are any guide, the Minister may well repeat her line that we should be grateful to non-doms for paying £7.9 billion in UK taxes last year.

[The Financial Secretary to the Treasury (Victoria Atkins)]

On a point of order, Mr Deputy Speaker. If I am going to be quoted, I expect to be quoted correctly. The hon. Gentleman seems to use words I am not sure he quite understands—I do not know. In my speech, I am going to help him to understand some of the words he has used. But I have only ever sought to set out the facts, which we have to take into account on the issue under discussion, which is that they do pay £7.9 billion in tax. That is the context in which I have cited that figure, not in the way that he has alleged.

[Mr Deputy Speaker]

Shadow Minister, do you want to respond to that? They were your words, not mine.

[James Murray]

I am not sure I want to respond to that. The Minister has made her point. No doubt she will have a further chance in a few moments to set out those points again. She confirmed, in fact, that she is seeking to use as a defence for non-dom tax status the fact that non-doms paid £7.9 billion in UK taxes last year. Of course that argument entirely misses the point. We are talking about the £3.2 billion of tax that non-doms do not pay each year in this country.

Without wanting to forecast what might come in a few minutes, I suspect the Minister might also recycle her line that non-doms have invested £6 billion in investment schemes since 2012. But, of course, that ignores the fact that only 1% of non-doms invest their overseas income in the UK in any given year, and that non-dom status actively discourages people from bringing money into the UK to invest. Finally, the Minister may try to win praise for the Government having stopped non-dom status being permanent, but I suspect she will neglect to mention the fact that the Government have created a brand-new loophole that allows people to use offshore trusts to retain non-dom benefits permanently.

To be fair, while Treasury Ministers have come to the Dispatch Box time and again to defend non-dom tax status, the Chancellor did at least confirm to the House of Commons Treasury Committee on 23 November last year that he had asked the Treasury to look into how much abolishing that loophole would save. When he was questioned at that Committee by the superb interrogator, my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh), the Chancellor claimed:

“I want to make sure that anything you do in terms of the non-dom tax regime does not mean you lose more than you gain.”

We already have clear, well-evidenced work from the London School of Economics and Warwick University—respected academic institutions, using HMRC data—which confirms that non-dom tax status costs the public finances £3.2 billion a year, even after any behavioural effects are taken into account. If the Chancellor is determined to ask his officials to confirm that figure, presumably using the same HMRC data as the LSE and Warwick University, we want to see him doing so as quickly as possible, and we want to see the result. That is why we have tabled today’s Humble Address.

We believe that non-dom tax status should be abolished, but that is not what we will be voting to make happen today. All we are voting for today is to make sure that, by the end of next month, the analysis the Chancellor referred to at the Treasury Committee on 23 November last year is published. Our motion would put that analysis alongside any other document or analysis on non-doms prepared for the Chancellor since he took office into the public domain ahead of the spring Budget.

I would hope that a Government supposedly committed to integrity, professionalism and accountability would feel obliged to accept that request. If not, the question will surely arise, what have they got to hide? What is it they are so keen to keep out of the public domain? What questions or conclusions are they so desperate to avoid? Our motion would simply make sure that any information the Chancellor has been considering in relation to the non-dom tax status would be made public ahead of the spring Budget in March 2023.

We know what happened at the last fiscal event, the autumn statement in November 2022. The decisions taken by the Chancellor at that time hit working people by forcing through a council tax rise and extending freezes in thresholds for income tax and national insurance contributions. Those freezes in tax thresholds will, over time, cost the average household more than £1,000 a year, and yet, at the same time as announcing those tax rises on working people last November, the Chancellor was silent on non-doms. That is what it looks like when working people are forced to pay for this Government’s failure.

Time and again, the Conservatives have chosen to put the burden of tax on to working people, rather than asking those with the broadest shoulders to pay their fair share. If working people are being asked to pay more tax, it is simply wrong to allow well-off people to continue to benefit from an outdated tax break on their overseas income. The truth is that Labour wants lower taxes for people who keep the country moving. The Tories want lower taxes for people who move their tax status overseas. We believe that if a person makes Britain their home, they should pay their taxes here. We believe that abolishing this tax loophole should be common sense and that using that money to invest in the NHS and childcare should make it a no-brainer. We will be voting today to make this Government finally come clean about why they are so reluctant to do the right thing.