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Labour playing politics - speech on non-dom tax status

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Tuesday, 31 January, 2023
  • Speeches in Parliament

Speech in full: 

It is a pleasure to follow the hon. Member for Bradford West (Naz Shah).

I want to start by congratulating the Government on what today’s IMF report says about economic growth last year. Despite what some Opposition Members have said, the fact is that we had the fastest-growing economy in the G7 last year, with a growth rate of 4.1%. Our economy grew twice as fast as America and Germany, 1.5 times as fast as France and almost three times as fast as Japan. Those are the facts.

I turn to the Opposition motion. I will address first the policy, then the motion itself, and finally the politics. On policy, I think there is some agreement between our position, Labour’s and the SNP’s. We want a tax system that is fair—clearly people who are better off need to pay their fair share of tax—but that is also attractive to internationally mobile people, whether they are overseas students or international businesspeople. Thirty-five jurisdictions around the world have regimes involving temporary residence tax schemes similar to the non-dom scheme. They might go by different names, but they have the same basis. If people are in a country for a certain length of time but it is not their permanent destination, they should be subject to a regime whereby they pay tax on their local income but not on their international income, and, in fact, I think that that is Labour’s policy.

As for the non-dom scheme in the UK, this Government reduced the period to 15 years—it was previously a permanent scheme—and I think that that was the right thing to do, although questions are being asked about whether it should be reduced further, to 10 years or five. There are also problems that have been rightly ridiculed in the media. For example, people have previously been able to inherit non-dom status. There is also no clear legal definition of “domicile”, although it ought to be crystal clear. I would certainly welcome reforms to the regime. Labour says that it would abolish non-dom status, but I suspect that it would just introduce a new regime that would do remarkably similar things to ensure that internationally mobile people who bring benefits to the economy can come here.

As for the economic impact of scrapping non-dom status, I asked the hon. Member for Ealing North (James Murray) why he thought the previous Labour Prime Ministers, Tony Blair and Gordon Brown, had not done it, and gave him the answer: they had carried out a review and concluded that, overall, the benefits of non-dom status were greater than the cost and so it brought a net benefit to the economy. There is a spectrum of data, and we do need the data, but if the regime were scrapped and everyone who abided by it suddenly fled in a mass wealth exodus, there would clearly be a huge net loss to the Treasury, whereas if it were scrapped and not replaced with anything, and all those people stayed here and suddenly started paying tax on their overseas earnings, the £3.2 billion a year that we have heard about would clearly bring a net benefit. What really matters is what the response would be among existing non-dom people but also among future ones who might not come to the UK as a result. It is necessary to have the precise data to create the optimum scheme, so that we not only raise revenue for the UK Government to pay for public services but ensure that people pay their fair share.

We clearly should not publish Treasury advice, as the motion suggests, for all the reasons given by my right hon. and learned Friend the Member for Northampton North (Michael Ellis).

Finally, let me comment on the politics: why does Labour keep focusing on this one issue rather than many others that are actually more important? It is all about politics. Labour is the party of envy, and we are the party of aspiration. We are the party of workers. We have reduced tax on working people, we have increased funding for the NHS to historically record levels, and all that Labour Members are trying to do is play politics with us.

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Full text of speech:

 

Thank you, Madam Deputy Speaker—and thank you, colleagues. So much to say, so little time to say it.

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