The Chancellor has done one humiliating U-turn after another. Her latest could finish her.
Chancellor Rachel Reeves has discovered we do need rich people after all (Image: Getty)
Rachel Reeves has done so many about-turns, she doesn’t know which way she’s facing. Now she’s stealthily trying to trash another manifesto pledge, but this one is different. Instead of annoying voters and taxpayers, as the others have done, this one will drive the left of the Labour Party crazy with anger. Lefties will hate what Reeves is planning next, which is why she’s trying to sneak it past them and hope they won’t notice. But they will.
I’m losing track of all the U-turns, but from memory there was the winter fuel payment, the National Insurance raid, welfare benefit cuts, the 2p income tax hike that never happened, the so-called “tractor tax” on farmers, and the latest reversal on business rates for pubs. Add the grooming gangs inquiry and the Waspi women, which are down to Keir Starmer, and that’s a staggering eight reversals already. Now Reeves is lining up another.
Rest easy, Express readers. For once, this won’t involve most of us paying even more tax. Nor will it involve doing something unspeakable to the state pension, as Reeves has just done with her two-tier tax system.
But it will cause chaos inside the Labour Party.
In its 2024 manifesto, Labour promised it would only raise three taxes, on foreign non-doms, private schools and oil companies. Now she’s quietly walking back one of them, the tax raid on non-doms, which she announced in her maiden Budget.
This may not affect you directly, but keep reading, because it will. As I repeatedly warned, Reeves’s tax raid on non-doms, wealthy foreigners who make Britain their home, has been a disaster. Reeves thought taxing rich foreigners harder would be a vote winner. As a rule, voters like taxes that others have to pay. But there’s a problem.
Wealthy foreigners don’t have to stay put. They can simply leave for a more tax-friendly country and take their money with them. That’s exactly what’s been happening.
Every time a non-dom leaves, HMRC loses around £150,000 a year in the income tax, National Insurance and capital gains tax they pay. That’s far more than the average UK taxpayer contributes.
HMRC can’t yet say exactly how many have gone to Dubai, Italy or elsewhere, but estimates suggest around one in four.
With roughly 80,000 non-doms previously in the UK, that points to a loss of around £3billion a year in tax revenue. And ordinary taxpayers will have to plug the gap.
Others will pay by losing their jobs. How come? Because we also lose the wider economic benefit non-doms bring, from stamp duty on expensive homes to spending in shops, pubs and restaurants, plus demand for all sorts of luxury goods and services.
It also makes the UK a less attractive destination for wealthy foreigners, scaring off job-creating entrepreneurs, who don’t want to expose themselves to HMRC.
The real damage came from Reeves’s intention to slap inheritance tax on non-doms’ worldwide assets. Some could pay hundreds of millions of pounds, on homes, wealth and businesses that have got nothing to do with the UK. Instead, they’ve left.
Dim-witted Reeves is now scrambling to do another botched fix. But too late. The money has gone.
Walking it back will enrage lefties everywhere, because if there’s one thing it can agree on, it’s taxing the rich is a brilliant thing to do. Even if it makes the rest of us even poorer.
Reeves is finally doing something sensible. Against her own instincts. And her own party will tear her apart for it. Enjoy the show.
