To ask His Majesty’s Government what assessment they have made of the economic impact of their plans regarding abolishing non-domicile status, which will now be modified following the announcement by the Chancellor of the Exchequer at the World Economic Forum in Davos.
My Lords, the Government are making elements of the non-dom reforms simpler and more attractive to use while retaining the structure announced in the Budget. We do not expect these changes to impact the £33.8 billion of tax revenue which the OBR forecasts will be raised over five years from this Government’s and the previous Government’s changes to the non-dom tax regime. These changes reflect continued engagement with stakeholders to ensure that these reforms operate as intended.
It is clear to me and many others that the Government do not have any idea of the amount of loss to the Revenue that the tens of thousands of people leaving this country—ultra high net worth people—will have. Adjusting the temporary repatriation facility just simply will not cut the ice or move the dial at all. I know of one City firm where 20% of the executives have left. Does the Minister not realise that insisting on subjecting wealth created and parked offshore to UK inheritance tax will drive former non-doms out of the UK? That will leave the Labour Government with a real £22 billion black hole.
I am very grateful to the noble Lord, as always, for mentioning the £22 billion black hole. He mentions lost revenue. I remember the noble Lord telling me when my party was in opposition that our policy on non-doms would not raise any revenue, but in fact cost money. Just a few weeks after that, his Government performed a screeching U-turn and scored over £20 billion by implementing our policy, when they adopted it as their own. He was mistaken then, and I am very confident that he is mistaken now. The costings certified by the OBR for the previous Government’s and this Government’s reforms account for a potential behavioural response. But I do not recognise at all the figures that the noble Lord gives, which are purely speculative.
My Lords, dropping the changes anticipated to the non-dom regime would not be fair to UK-domiciled taxpayers and to UK public finances. However, it is also wrong if those who have come from abroad to work here end up paying double taxation. Have the Government looked to update the UK’s tax treaties, which are meant to eliminate double taxation but currently fall short in significant areas, especially with complex tax countries such as the USA? Would he agree that it is not just a fairness issue? Sorting the many discrepancies would encourage many productive people to remain who are currently either leaving or considering leaving.
I am very grateful to the noble Baroness for her question. To be clear, we are not dropping any reforms; we are making sure that they are working as intended, and we are trying to make the system as simple as possible to use so that those people are able to come to our country and invest in it. The noble Baroness asked about double taxation conventions. The Chancellor has been very clear that the reforms to the taxation of non-domiciled individuals do not affect the UK’s existing double taxation conventions, and we do not intend to change those treaties.
My Lords, the legislation of successive Governments has resulted in the closure or downsizing of many international ship owners’ offices in London and the UK. This is a very important business; Britain has a world-leading maritime professional business services sector. Will the Minister ensure that all consideration is given to increasing the domicile arrangements so that they are more in line with Europe, so that the principal—himself or herself—who very often takes the very top decisions, could spend more of their time here?
I am grateful to the noble Lord, and I am of course happy to look at that. Obviously, we keep this policy under review and will continue to engage with stakeholders to ensure that the system operates as it should. It is important to remember that the basis of this policy is ensuring that everyone who makes their home in the UK should pay their taxes here; that is absolutely the right thing to do. We want to ensure that our system remains internationally competitive, and the system that we are introducing as a result of these reforms is far more internationally competitive than the system that it replaces.
My Lords, for far too long the wants of the few have been prioritised over the needs of the many. I cannot recall marches or petitions calling for concessions to wealthy non-doms, but despite marches and petitions, the two-child benefit cap and winter fuel payments cut for pensioners below the poverty line remain. Can the Minister offer some guidance to families and pensioners as to how they can get a concession too?
The Government are committed to making sure that the wealthiest in our society pay their fair share of tax, consistent with our commitment to economic growth. That is why the Chancellor announced a series of reforms at the Budget to help to fix the public finances in as fair a way as possible. That is absolutely what we are doing, and we are ensuring the fairest treatment to those affected.
My Lords, are the Government thinking that this money they are going to raise from all the non-doms is actually going to—as the former Labour Party might have hoped—lift people out of poverty, rather than crush them even further into poverty, as seems to be happening at the moment?
My Lords, do the Minister and the Government have any hard evidence, perhaps through a recalculation of the effects of the Bill on non-doms, that this news that was announced in Davos will have a tangible effect on the emigration of a lot of these non-doms? This does not look like a U-turn at all—for which the Government should be commended— but rather more like an L shape. The reason why I am asking this question is because the key criticism from the non-doms, and the reason why they are leaving, is that if someone lives here as a non-dom for four years they will have a 10-year tail on the inheritance on all their offshore assets. That is clearly something that is not acceptable to most of them. What I heard in Davos does not change that, and therefore I am not sure it really changes very much.
I am very grateful to the noble Lord for passing on the feedback that he heard. I am assuming that he agrees with this Government’s policy on non-doms, since he was an adviser to the previous Government when they actually took our policy, implemented it, and scored £20 billion for it. So I am assuming that he approves of our policy and of the fact that we are raising that revenue. The changes that we are making to the system to make it simpler and more attractive to use are based on speaking to the relevant stakeholders and ensuring that they find it attractive to use. As I say, the system that we are implementing is actually more competitive than the system that it replaces.