Labour’s tolerance does not extend to the rich

New Labour was keen to preach toleration for various minority groups, but their friendly theory never did extend to Tories or the rich.

Their recent witch hunt of selected Non Doms is a case in point. There is one thing much worse than seeing rich people avoid paying UK tax on their foreign earnings – and that would be to see them leave the UK or not come here in the first place, meaning they would not pay any tax at all here. I see nothing wrong with tax rules, presided over by both parties in government, that allow rich people with substantial overseas business interests and homes abroad to pay tax abroad on those, if they pay UK tax on their businesses and investments which they do base in the UK. It’s a win win for the UK taxman, as they come here, create jobs and companies here, and spend money here, paying tax on all those activities like the rest of us.

Given the state of near bankruptcy we now have been driven into, this country will need all the rich entrepeneurial friends it can find to pay some tax and create some enterprise here. It would be a foolish government which chose this moment to make the climate so hostile to enterprise and success that the rich queued up to leave or decided to stay away.

It becomes more complicated when these individuals wish to participate in UK politics and wish to spend some of their money on helping political parties. Both main parties have had Non Dom money, and all three parties have had some controversies over particular donors. Until recently it was accepted and it was legal for a party to propose a Non Dom for the House of Lords and for such a peer to influence the laws Parliament passes. Now the main parties have decided to change this ruling, and say only people paying full UK taxes on all their income and activities should be eligible for the Lords or able to stand for the Commons.

I have no problem with such a stance. It goes with the new spirit of transparency and regulation. The old position was defensible and used to cause no worry before the current crisis. It has never been a requirement to hold elected office or selected office in Parliament that you have experienced all the things we regulate or legislate about. Most Parliamentarians are not criminals, but happily opine on the best way to frame the criminal law. Men legislate for women and women for men. Adults legislate for children. A good legislator can think himself or herself into the position of those who will be affected by the legislation without necessarily having experienced the problem or situation themselves. It may seem strange today that people who did not pay UK taxes on all their worldwide income could legislate, yet such people were often paying more UK tax than others in the legislature because they were richer or more successful financially.

I would like to make one comment on Michael Ashcroft. At no time when I was Shadow Business Secretary, Shadow Environment Transport and Regions Secretary, or was busily writing the Economic Policy Report for the Opposition did Michael ever contact me to lobby me about the policies we were proposing, nor did he ever write to me seeking influence. Nor did any Leader ever do that for him.

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21 Comments

  1. Posted March 5, 2010 at 8:06 am | Permalink

    I personally don't think people should be UK tax on overseas earning as presumably they will be paying tax on where the money is earned. I also think people should be allowed to do what they want with their own money.

    The shady part of this, and by this I mean non-dom's and tax in general not this particular affair, is where tax havens are involved like Belize, Cayman Islands, Jersey, etc.

    I read Private Eye and every issue some media company (a lot of newspapers have been named but I shan't name them here for obvious reasons), large British retail chains, even the company that provides owns the treasury building under a PFI scheme, bizarrely enough, have their tax efficiency methods put under the spotlight.

    I don't fully understand how these tax havens operate but my feeling is that money is earned in the UK then by various financial sleight of hands moves around various tax havens via shell companies before coming back here. That's what really stinks in the tax system, people manipulating the system, not legitimate overseas income (if I understand correctly).

  2. Posted March 5, 2010 at 9:04 am | Permalink

    I agree with the post. The media and the opposition are whipping up a frenzy about something that is not wrong and has little to do with the real issues the country faces.
    Where I have a problem is that this is another example of the poor quality of the Conservative party's advisers, spin doctors etc. This whole business should have been foreseen and dealt with ages ago. In the eighties it was the Conservatives who had the best strategists and advisers and Labour who were floundering. Now it seems to be the other way around. We have no-one as clever as Mandelson, and have not found capable replacements for Bell, Saatchi etc. Ironic for the party that's supposed to understand business that we're so bad at it ourselves.
    I just hope that the Cons are getting all of our mistakes made early, and that it'll soon be Labour's turn to be on the back foot.

  3. Posted March 5, 2010 at 9:10 am | Permalink

    "It would be a foolish government which chose this moment to make the climate so hostile…." – yes, it's exactly what we have had for over a decade. That's why the economy is in such a state.

    The Labour party is entirely tolerant of wealthy non-doms, just as long as they are giving money to the Labour party. Lord Ashcroft supports "the enemy", so they are (as ever) playing the man rather than the ball. Lord Paul supports Labour, so he's promoted rather than pilloried.

    Why should Lord Ashcroft pay tax in the country that he is based, and then pay more tax on the same money in the UK? Consider were there to be a non-punitive tax policy in the UK, he would find it appealing to pay all his tax in the UK – a net gain. I don't care about tax havens, nor if Lord Ashcroft was to buy his own island in the middle of the ocean to keep his money safe. I'd like to be that fortunate, but I'm not jealous.

    If there is to be new legislation about the tax or residency status of those in the Upper House it's irrelevant and a waste of time, but OK. However, I don't think that anybody has accused Lord Ashcroft of breaking any laws. Perhaps he broke a promise, but considering how many promises politicians break to the electorate, it's utterly trivial.

    Reply: if you see Lord Ashcroft's website you can see he says he kept the two undertakings he made in writing to Mr Hague.

    • Posted March 5, 2010 at 7:16 pm | Permalink

      Perhaps you could send a link to the website to Ms Harman. It might help her to stop embarrasing herself at PMQs.

  4. Posted March 5, 2010 at 9:25 am | Permalink

    John, whilst I broadly agree with the Argument you put forward and your view about paying tax in the Country in which it is earned.

    Why is it that Political leaders always seem to want to push such people into the House of Lords, or place them in other positions of influence as some sort of reward for their financial contribution, if they are not seeking influence.

    We have had Purchasing of Knighthoods, we now have the Non Doms issue. All Party's it would seem are guilty.

    The House of Lords seems to me to be getting (some would say always has been) a Club for a the select few (700 or more members in total) who contribute to Party funds, instead of being the second House which should take an independent look at Government legislation.

    Our system of Government is failing.

    The Commons is now run by Party machines and the whipping system, where democratic debate and freedom of the individual MP's to vote is curtailed.

    The Lords seems to be stuffed with Party supporters who will vote in the majority of cases, according to a Party leaders desire.

    We thus end up with an elected Dictatorship for five years, after every election.

    Its "Yo Yo Politics", first one direction, then another, then another.

    No wonder we are in a mess and going downhill fast.

  5. Posted March 5, 2010 at 10:00 am | Permalink

    Voters dont care abut Michael Ashcroft. Sure defend him against Labour smears but your right to focus of the negative Labour smearing.

    Hate runs deep in Gordons heart.

  6. Posted March 5, 2010 at 10:40 am | Permalink

    Labour has no problem with the rich when they are supporters of their party. This Ashcroft imbroglio has been hyped up by Labour because they resent his influence in the marginal constituencies. They have neither the wit nor the gumption to do the same for their party despite the millions they receive from millionaires, domiciled and non domiciled, and their major paymasters in the unions. Whilst they are blathering on about this the national debt is rising inexorably but they don't care a jot about the real issues and will do anything to divert attention away from them. Their cousins in the LibDems are frankly no better. It is interesting how excited and exercised they can be over an issue like this whilst remaining virtually silent on our relentless progress towards economic ruin.

  7. Posted March 5, 2010 at 11:06 am | Permalink

    I feel the current affair is a "Do as I say not as I do" by both Labour and Lib Dems. Labour and Lib Dems have (and in the case of Labour still do) received funds from Non-Doms. Also the Lib Dems have received funds from a convicted fraudster which they still refuse to repay.

    We need to grow up over political party finances. We either need to fund them through the public purse or we allow them to raise funds from other sources. As long as those funds do not come from illegal sources (ie fraud) then we need to let the parties accept those funds.

    There is no real alternative to these options.

  8. Posted March 5, 2010 at 11:23 am | Permalink

    Labour's tolerance of the rich is very strong when they donate to Labour, of course.

  9. Posted March 5, 2010 at 11:37 am | Permalink

    JR: "Labour’s tolerance does not extend to the rich."

    On the contrary, Labour very much like the rich, but only if the 'rich' fall into two catagories:

    1. Those that have made their money milking the public purse. You will find examples of this type in the upper echelons of the Labour party.

    2. Those who are already rich and are prepared to donate to the Labour party. These individuals can get seats in the Lords, membership of the Privy council, (words left out).

  10. Posted March 5, 2010 at 12:40 pm | Permalink

    "Most Parliamentarians are not criminals"- really. I'm afraid the public perception backed by quite a lot of evidence contradicts this. Indeed if the law was applied to MPs as it is to the long suffering ordinary citizen then there would be numerous prosecutions pending right now. Just the fact that 52% of them over claimed on expenses is a scandal. In the firms I've worked for over claiming would get you fired.
    I accept that there are some honest people in politics but for all the promises of change and transparency little has changed. The elite still rule for themselves not the electorate.

    • Posted March 5, 2010 at 2:24 pm | Permalink

      I wonder if you've ever claimed expenses from a company. I bet most people have over claimed within the rules on, for example, petrol. The rules are the rules and politicians are no different from anyone else. Get to the person who made the rules and give him/her a going over.

      Anyway, it's again another example of taking our eyes off the main issues with the country.

      For goodness sake, no more about the expenses stuff now. Aren't we all bored rigid with it?

      It's such a great pity to my mind, that the British people don't expend as much energy on the travesty that is Europe, as they have done on the politicians expenses.

      In the greater scheme of things, that will cost us much, much, much more in the long run than the expense claims.

  11. Posted March 5, 2010 at 1:45 pm | Permalink

    Pretending that outlawing influence from a particular group of people prevents it is quite crass. It merely drives the influence underground, where unseen it can be much more pernicious – it becomes bribery and corruption. Much better to have full transparency, with voters able to decide who to support or not support taking account of that influence alongside the policies. Want a mansion tax and don't mind if the party is partly funded by a convicted fraudster? Vote Lib Dem. The donor upsets you despite the policies? Don't vote for them. You don't like the policies, whoever the donors are? Don't vote for them.

    The worst possible outcome would be a further shift to state funding of political parties. This already happens in practice via e.g. EU funding, and the party political broadcasting rights, as well as the added bonus conferred on government advertising that verges on party political, and devices such as funds granted to quangos who then make donations. These are all abuses of taxpayer funds.

  12. Posted March 5, 2010 at 2:20 pm | Permalink

    In all the discussion on non domiciled individuals the difference between residence and domicile has not been made clear. Residence can be changed in a moment. Today I am living in the UK and if I left tomorrow and lived in say France for requisite period, I would be treated as resident in France as from tomorrow. My UK tax would be calculated on the basis that I am non resident from that day.
    Domicile is acquired on birth and is very difficult to change. If I had left this country when I was a child and became an adult with very little contact with the UK, I could argue that my domicile had changed after a considerable period of time perhaps 20 years or more.
    For Lord Ashcroft who has substantial business interests in Belize and maintains a home there cannot be said to have severed his links with that country and could not claim to have changed his domicile to the UK.
    UK tax law would need to be changed to allow an individual to change their domicile at will. This is extremely unlikely as all the UK domicles now living abroad would escape substantial amounts of UK tax by changing their domicile if they could.
    For Lord Ashcroft to pay tax on his world income would not be a payment of Income Tax as there is no mechanism to collect such a payment as it is not due. He would make a voluntary gift to the Exchequer equivalent to what would be payable if he were a UK domiciled person.

  13. Posted March 5, 2010 at 6:51 pm | Permalink

    Lord Peter is nowhere to be seen.
    Ed Balls is disgusted at this totally unacceptable behaviour.
    The BBC spent twenty minutes on this.
    Do you know what?
    I smell a rat.
    On Wednesday, Michael Gove announced his education policy. I was at the meeting. Stunning! Not only did he know what he was on about, he fielded all the balls fast and well. The speakers were experts.
    So where was that? Did you see the couple of minutes it got on the news?
    Strange, isn't it, how "scandals" seem to occur at exactly the right moment.

  14. Posted March 5, 2010 at 7:29 pm | Permalink

    The concept of “domicile” is an anomaly in our tax system, which has led to an anomaly in our representation in the House of Lords.

    First, it seems sensible that Country of residence, not domicile should determine where you pay your income tax, as the Country of residence is where you are receiving the benefits. Company taxes meanwhile should be levied where they are earned. In the modern world “domicile” is a misnomer. If my mother is French, father Australian and I’m born in say Kuwait, then I grow up in say Sweden, what is my domicile?

    We seem to be using this notion of “domicile” to give tax advantages to some notionally UK residents whilst demanding UK tax from UK “domiciles” whom are non-resident (see the Robert Gains-Cooper case recently). So our tax law is totally skewed against reason. If we had competitive tax rates we wouldn’t need these anomalous “non-dom” rules to cater to a few folk who can manipulate their lifestyles to live here whilst being “domiciled” elsewhere.

    Second, only UK residents i.e. those who should logically be paying income tax here, should represent us in the HOC and HOL. I think you are missing the point John in what you say about adults legislating for children, women for men etc. Every one of you and those in the HOL should represent some part of us as a nation. I would contend that anybody who doesn’t reside here has no such basis to represent us. equally anybody who does, as a long term UK citizen, regardless of "domicile", does.

  15. Posted March 6, 2010 at 9:31 am | Permalink

    Good bit of sand bagging from John here in his tin hat. Whatever all you apologists argue about the in and outs of taxation for the rich, parliament makes the tax laws in this country and can change these laws as it sees fit. If the Isle Of Man was told to have the same tax system as the rest of the UK they would. End of story. The credibility of the Conservative party has been dealt a body blow by this affair. They are not in it with the rest of us etc. Does the population in Britain want to be governed by elite billionaires like Ashcroft and Murdoch (influencing-ed) multi millionaires like Hague, Cameron and Osbourne None of whom, going by their lifestyles paid for by cushy jobs, inheritance, freebies and expenses seem to live in a world occupied by the rest of us. To say wealth and privilege would not have an effect on ones decisions especially these characters is laughable. What they and the rest of you are doing is trying to defend the indefensible. It is highly questionable that Non Doms contribute anything to Britain, a classic case of the horse pushing the cart if you think as to the reasons why they are here. I bet not many of you Tories will be moving to Belize if Labour wins though I suspect a few will be threatening to. The Belize motto is "Under the Shade I Flourish".

    Reply: Why do you think multimillionaires like Blair and the rest of the Labour high command are unaffected by their income and status? How about Miss Harman, who went to a privileged school and comes from a wealthy family? All MPs are on salaries and expenses well above the average, and many Labour MPs supplement their MP's pay with second job pay as Ministers, Whips, Committee Chairmen, Directors, Advisers etc.

    • Posted March 6, 2010 at 10:24 am | Permalink

      Are you willing to defend the hypocrisy of "The Peoples' Prime Minister", Blair, being elected in 1997, good old Tone, one of us?
      12 years later he has his £6 million Buckinghamshire pad, non-job at Morgan Stanley…. all on the back of being elected as one of the "common people". These guys are laughing at you, as they evade planning permission for their tennis courts and swimming pools my friend….

      • Posted March 6, 2010 at 7:29 pm | Permalink

        Blair was a genius as politician and a complete W%4£&^ as a person. A classic case of selling out. Luger in the drawing room for you Tone. If you get it that is…

  16. Posted March 12, 2010 at 2:47 pm | Permalink

    A great blog to visit daily, it shares all the stuff that everyone wants to know. I want to subscribe this blog so can you tell me when your blog gets updated.

    Reply: Every morning

  17. Posted March 20, 2010 at 5:43 pm | Permalink

    Why the coyness about MA's most striking good points – his decency, patriotism, and philanthropy? (The last two being alien concepts to socialists.)

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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