LABOUR DISARRAY

Miliband says he’ll end them... then admits he’ll just tweak rules after the true cost is revealed. And, oh yes, Balls had earlier ruled out a ban

ED Miliband’s proposed change in the rules on ‘ non- doms’ would cost Britain billions, experts warned last night.

The Labour leader announced plans to overhaul Britain’s non-domicile regime, which allows 116,000 foreigners and people with foreign links to pay tax only on money that they bring into Britain.

Mr Miliband initially suggested he would ‘abolish’ non-dom status – but it later emerged that Labour is effectively proposing a time limit on it of between two and five years. The Labour leader’s aides claimed this was necessary to ensure those who come to study or work for short periods were not penalised.

However, the Tories pointed out that such a grace period would mean up to six in ten non- doms would not be affected by the crackdown, because many do not stay here for longer than five years. Announcing the policy, Labour claimed the change in the rules, which date back to the 18th century, would raise as much as £1billion.

Tax advisers immediately disputed this, saying driving non-doms away would in fact cost the Treasury significant sums. With nondoms paying around £8billion in tax and national insurance a year, it is claimed that Labour’s proposal could in fact create a huge hole in Treasury coffers.

Within hours of announcing the policy, Shadow Chancellor Ed Balls was forced to admit he did not actually know how much extra cash the measure would raise.

In a further embarrassment, it later transpired that just three months ago he himself had said such a move would be counter-productive – saying it would result in the country losing money.

In a video that emerged yesterday, Mr Balls can be seen telling a local BBC radio station that abolishing the status altogether ‘will probably end up costing Britain money because some people will leave the country’.

Despite this, the surprise move by Labour wrongfooted the Conservatives, who took several hours to craft a coherent response.

The issue of non-doms is a sensitive one for the Tories, because Mr Miliband has claimed David Cameron is close to ‘dodgy donors’, including non-doms, who support the party.

Labour has repeatedly attempted to characterise the Tories as friends of the rich – despite official figures showing the best-off are paying more tax than they did under the last Labour government.

Last night, sources close to Chancellor George Osborne indicated he would consider scrapping the right to pass on non-dom status to heirs. Last year Mr Osborne announced a new £90,000 annual charge for people who are non- domiciled in the UK for tax purposes but have lived here for 17 of the past 20 years.

Tory officials said it was more effective to hit non- doms with an annual levy than to ‘tinker’ with the status. The Chancellor said: ‘Labour’s policy is a total shambles. You have Ed Balls admitting it will cost Britain money and then when you look at the small print it turns out the majority of non-doms won’t be affected.’ In a speech at the University of Warwick, Mr Miliband insisted nondom status was an ‘arcane’ rule dating back to the time of William Pitt the Younger, allowing a ‘few people at the top’ to ‘operate under different rules’.

‘There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, were brought up here, but just aren’t required to pay taxes like you and me,’ he said. Graham Aaronson QC, who chaired an independent committee which drew up new rules against tax avoidance, said the non- dom regime did need reform. He said he had advised the Treasury two years ago the right to pass it on to heirs should be scrapped, and suggested he also favoured removing the right for British citizens to claim it. But he was scathing about Labour’s proposals, which he said would cost the country dear.

‘It’s either unbelievable deception or the man is completely pig ignorant,’ he told the Daily Mail.

‘I couldn’t believe what I was listening to. This is why politicians have such a bad name. Mr Miliband was describing non-doms born here, brought up here, who go to school here, use our hospitals. The audi- ence would have thought that’s what a non- dom is. But it’s a very small number. There are those that live abroad – their main family life, home and base – but they choose to live in the UK for a month and a half a year. They pay taxes when they’re here, they may employ people. It’s ridiculous to treat them the same way.’

Jolyon Maugham, the QC who advised Labour on its plans for reform, conceded the policy could lead to a flight of wealthy taxpayers from Britain. Yet the Labour supporter was cited by both Mr Miliband and Mr Balls as an independent expert who supports the policy.

The QC, who admitted the Tories have a ‘terrific record’ on squeezing tax dodging, said his own calculations suggested the measure was likely to raise about £1billion, but there was a risk of a ‘ negative tax yield’.

Lib Dem leader Nick Clegg defended the non-dom rule, saying it allowed people to come to Britain, some of whom were not ‘massively rich’.

Former Tory Chancellor Kenneth Clarke last night said any foreigner ‘with any common sense’ would leave Britain under Labour, telling Newsnight that the party’s latest policy was ‘populist nonsense’.

IT is incontrovertible that, in the aftermath of the financial crash, voters are seething over a tax system which – while merciless in pursuit of the tiniest transgressions by millions of ordinary PAYE employees – does not always ensure the very wealthy pay what they owe.

But, while yesterday’s pledge by Ed Miliband to scrap the ‘non-dom’ regime used to limit tax liabilities on overseas assets is shrewd (and how he likes to exploit the politics of envy), the Labour leader is playing a dangerous, disingenuous and dishonest game.

For, as his own shadow chancellor Ed Balls admitted in January: ‘If you abolish the whole (non- dom) status, then probably it ends up costing Britain money because some people will then leave the country.’ The emergence of these taped remarks yesterday was one of a series of gaffes from the egregious Red Ed. For instance, Labour could only find one ‘ independent’ tax expert to defend its plans – and he was soon unmasked as a party activist.

But what really undermined Mr Miliband’s case were statistics showing the UK’s 116,000 non-doms contribute £8billion in income tax and National Insurance – more than treble the £2.3billion contribution made by the 25 per cent lowest income tax payers.

Most crucially, they bring investment to Britain and create countless jobs – with business leaders warning that driving nondoms away with a financially illiterate tax regime would devastate the broader economy.

Yes, Britain’s unfair tax system needs reform – a fact the Tories (who have struggled to distance themselves from the rich and privileged) would do well to grasp. But cynically populist policies that would

actually lose the Exchequer money help no one – as the economic basket case that is Socialist France so eloquently proves.