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29 February 2024

Jeremy Hunt’s non-dom ploy should worry Labour

Keir Starmer’s party risks losing one of its flagship policies and key revenue raisers.

By Freddie Hayward

The Tories do have a sense of humour. Jeremy Hunt might snatch Labour’s flagship tax policy: scrapping the non-dom tax status that allows wealthy individuals to avoid tax on income made abroad. Any cash for the Treasury would be spent on a further cut to National Insurance.

Those are the reports, anyway. Newspaper stories ahead of the Budget are often used by the government to test out a policy, as much as reveal their genuine plans.

But if it does happen, would the move put Sunak in an awkward position because his wife once benefited from non-dom status? It was the story that most dented his shining reputation during his mensis horribilis in April 2022. It symbolises the out-of-touch, internationalist image that Sunak is struggling to shake. But what better way for the Prime Minister to prove that he chooses the NHS over the jet-setting rich than by thwacking a tax on their foreign earnings. That’s the reason Labour wrote the policy in the first place: to signal to voters that the rich would pay for better public services, not the ordinary working person. It would be a smart move from No 11.

There is the old problem of the government railing against the policy for a few years. But U-turns are the order of the day. It will be tricky for Labour to complain given its own U-turn habit and support for the policy. In one raid on Labour’s manifesto, the Tories could steal a policy that was designed to draw a line between the two parties and prove that Labour is on the side of working people. It’s a manifesto mugging.

That’s not the only problem for Labour. The move would force the party to explain how it would pay for all the commitments the non-dom money had funded (such as the NHS workforce plan and school breakfast clubs). Either Labour would have to reverse the cut to National Insurance, increase borrowing or scrap the plans. The government – as ever – controls the baseline from which Labour must make policy. This move would push the opposition back to square one.

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While Labour mulls on that, voters might be struck by the growing similarity between the two main parties. Enthusiasm for politics is in the gutter. Labour might need something to distinguish itself from the Tories to enthuse its voters. That’s the concern among some Labour MPs, anyway. Some shadow ministers fear that the party’s leadership is taking a risk by not being more radical. Decision time for Keir Starmer.

This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.

[See also: Inside Labour left’s split]

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