Scrapping non-dom tax status ‘an utter humiliation’ for government, Labour says

Scrapping the non-dom tax status for wealthy foreign nationals is “an utter humiliation for this government”, shadow chancellor Rachel Reeves has said.

“The last budget of this parliament – they’ve had 14 years and they use this moment to close a non-dom tax loophole that everyone has been aware of for years,” Ms Reeves told Sky News’ Sunday Morning With Trevor Phillips.

“If they had done this when we first announced it we could have brought in billions of pounds extra to either keep taxes down for working people” or invest in other priorities, she said.

In last Wednesday’s budget, Chancellor Jeremy Hunt committed to cutting the tax status for non-doms – short for non-domiciled individuals, who live in the UK but whose permanent home is abroad.

The tax break allows people with non-dom status to only pay tax on money earned in the UK, meaning their overseas income and wealth are not subject to UK tax for up to 15 years. But the chancellor has cut that to four years, a move expected to raise £2.7bn a year towards tax cuts.

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Asked why she was not praising Mr Hunt for taking an idea she supports, Ms Reeves said: “Because they could have done it years ago and we could have reduced those NHS hospital waiting lists…

“Imagine what good could have been done if the chancellor and prime minister had done this years ago.

“So it is a humiliation that they’re doing it at this late stage. They’ve run out of ideas, they’re quickly running out of road.”

Shadow chancellor Rachel Reeves. Pic: PA
Pic: PA

Asked if Labour would stick to the government’s spending plans, Ms Reeves said there were “areas where we would do more” and noted she has already announced “a small number of targeted tax increases to provide an immediate injection of cash into public services”.

These include the plan to make private schools pay VAT and business rates, and expanding the oil and gas company windfall tax.

She said Labour has fiscal rules she will enforce with an “iron discipline” which are “slightly different” to what the government has in place.

The aim is to “boost our long-term growth and productivity”, which is “absolutely key and has been the missing ingredient in the government’s economic approach the last 14 years”.

She said our economy “would be £140bn bigger” with a similar approach to other OECD countries.

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Pressed on where else she would raise revenue for her party’s priorities, Ms Reeves said she would go through the budget documents to work out where else money could be raised.

“Those pledges very much stand,” she said. “They are national priorities and they are Labour’s priorities as well, and we will now make sure we identify the funding streams, because everything in our manifesto will be fully funded.”

She repeated her pledge there would be no additional borrowing to pay for day-to-day expenditure.

“I’ve been very clear about the fiscal rules to get debt falling as a share of GDP, to pay for day-to-day expenditure through tax receipts and there won’t be anything in our manifesto that breaks those rules.”