Don’t bash the global rich, Keir Starmer – tax them instead

If Labour wants to be the party of aspiration and business, it has missed a couple of tricks with its policy toward non-doms, says John Rentoul

Keir Starmer and his shadow chancellor Rachel Reeves should invent a modern non-dom status – a supertax on footloose plutocrats (Reuters)

Tony Blair is unenthusiastic about the two Labour policies that are designed to raise most of the money to pay for the party’s modest pledges. “He doesn’t like VAT on school fees, or ending non-doms,” I am told.

As usual, Blair is right.

Taxing school fees sends the wrong signal about people who want the best for their children. Even if at least one person who worked for the former prime minister who is now working for Keir Starmer insists that Blair’s promise to abolish the assisted place scheme in 1997 was similar in principle.

But it wasn’t the same. The assisted places scheme was an unfair handout of public money on criteria that were unclear, whereas VAT on school fees is a way of disapproving of the aspirations of most of the people. The policy is superficially popular because, for the vast majority of voters, it is a way of taxing Somebody Else, but it sends a subliminal signal that Blair would never have sent.

Abolition of non-dom status is even more superficially popular, because it means taxing people whose lifestyle is so far removed from the average that, although it may be aspired to in theory, it seems other-worldly. But again, it is not in the national interest, because it will drive away people from this country who bring spending, jobs and tax revenue.

As Ed Balls, when he was shadow chancellor in 2015, tried to explain: “It probably ends up costing Britain money, because there’ll be some people who will then leave the country.”

But wait a minute: haven’t the Conservatives announced that they will abolish non-dom status? Indeed they have. It was one of the measures in the Budget designed to shoot Labour’s fox – or, rather, to shoot its golden goose, which was supposed to lay the eggs to pay for the party’s election promises.

Rachel Reeves, the shadow chancellor, has been reduced to saying that she would abolish non-dom status even more than the Tories would, just as she would levy an even higher windfall tax on oil and gas companies – another of her sources of revenue that the government has stolen.

Here, Labour has taken the wrong turning, I think. Instead of trying to outdo the Tories in bashing the global rich, Reeves should be trying to shoot the Tories’ fox by promising to reinvent a modern non-dom status – a supertax on footloose plutocrats that is set high enough to raise serious amounts of revenue, but low enough to encourage them to stay in Britain and to create wealth here.

I am talking of getting half a million pounds a year from them in tax. Upfront and agreed. No questions. One deal fits all. Give them a contract for this lucrative tax grab for 20 years and they will not flee Britain and spend their money on homes and services in Spain or Portugal or Dubai, which are competing for these big spenders.

This would encourage huge investment rather than people fleeing. It would be a fair Robin Hood Tax. The very, very rich from abroad would pay it, and the rest of the voters of this country would benefit, as tax coffers would be filled by them to pay for services for us all. This would be a vast tax rise – from around £100,000 to five times that amount.

And call this what it is: a Super-Rich Foreigners’ Tax.

Peter Mandelson was on to something when he said this week that Labour had successfully laid claim to the mantle of “change” – “but that’s not necessarily yet change that I, the voter, can believe in”.

Of course, the retort to this Blairite criticism is that, if the Labour campaign has been so disastrous, then perhaps Labour should make it more disastrous still, and try to increase its 21-point average opinion poll lead.

But the true Blairite argument is that Labour can never be satisfied with its lead in the opinion polls. No matter how far ahead the party appears to be, it should still be trying to maximise its vote. The problem with the school fees policy is that it deliberately limits the party’s appeal, saying to parents who have chosen private schools that Labour doesn’t want their votes. It says the same to non-doms, some of whom are entitled to vote as British citizens, although there are fewer of them.

And the thing about driving rich people out of the country is that it is not in the national interest. If people want Other People to pay taxes, then we don’t want non-doms to leave, we want them to pay.

I thought there were two moments in the election campaign this week when Labour seemed to recognise the truth of the Blairite critique. There was a noticeable change of tone in Starmer’s reply to a question about the tax on school fees after his campaign launch speech on Monday. He went out of his way to say how much he “respects” parents who work hard and save to send their children to private schools.

He defended the policy on grounds of regrettable necessity, rather than class war, saying he needed to find the money to pay for 6,500 new teachers in state secondary schools. It was as if he was saying that he had to find the money from somewhere, and this is a way of taking it from the better off without putting up income tax rates.

The other moment was when Labour published a list of business backers on Monday night, which felt distinctly underpowered. It consisted of a lot of sole traders, former chief execs and Tom Kerridge, the chef.

If Labour really wants to be the party of business, in government of a country that is open to the talents of the world, it shouldn’t be trying to drive away the global rich, it should be taxing them.