Jeremy Hunt is looking for ways to meet his tax-cut and spending commitments. Photo: AP Photo/Frank Augstein, File
Jeremy Hunt The Telegraph can reveal he is considering scrapping non-resident status to fund tax cuts for millions of workers in next week's Budget.
The move is included in the list options for increasing income, compiled for the chancellor and rishis. Sunak, after economic estimates showed they had less money than expected to spend on tax cuts or spending commitments.
If it is announced, the Conservatives will be poaching one of Labour's best-known tax and spending policies.
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It will also reignite debate over whether repealing the status will hinder rather than help economy, forcing wealthy foreigners to settle elsewhere.
Mr Hunt is understood to have advised officials to ensure fiscal policy did not risk the competitiveness of the City of London.
It comes amid a growing row over the Ministry of Defense being denied more money in the budget, as first reported by The Telegraph. Penny Mordaunt, the leader of the House of Commons, said after talks with Mr Hunt on Wednesday that protecting Britain was «our first responsibility».
The Treasury is also considering cutting future spending on public services after the general election, instead changing the assumption of a 1 per cent annual increase to a real rate of 0.75 per cent.
However, pensioners received a boost on Wednesday as it emerged that the triple pension lock will be included in the next Conservative Party election manifesto.
Non-domiciled status allows foreign nationals who live in the UK but are legally domiciled abroad to avoid paying UK tax on their overseas income or capital gains.
It is not clear how much tax revenue would be generated by eliminating the status. Last year scientists estimated it could generate £3.6 billion a year. Labor says its policy, which instead provides tougher tax breaks for foreigners temporarily in the UK, will give it £2 billion a year in spending.
A final decision on whether this measure will be included in the budget has not yet been made, and the final round of economic and financial forecasts will be presented by the Office for Budget Responsibility later on this week, must determine whether it is necessary.
< p>But the fact that this option is being considered in less than a week shows how seriously the Treasury and Number 10 are considering it.
Mr Hunt is determined to announce tax cuts in his March 6 Budget, with cutting the national insurance rate or income tax is the main option.
However, lower-than-expected estimates of the fiscal headroom — the amount of money remaining after the government's pledge to achieve reductions in the national debt in five years — leave limited room for manoeuvre.
Giving up non-resident tax status could prove politically difficult for Mr Hunt, who opposed the change in November 2022 when Labor proposed it.
Mr Hunt said at the time he did not think it made sense revoke the special tax status, and insisted that it would be “wrong.”
He told BBC Radio Four: “These are foreigners who could live easily in Ireland, France, Portugal, Spain. Everyone has such schemes. All things being equal, I would prefer them to stay here and spend their money here.»
However, there may be political benefits here. The Labor Party has already announced spending of £2 billion a year based on savings from abolishing non-resident status.
This includes £1.1 billion for two million more NHS surgeries, scans and visits on evenings and weekends; £171 million for new AI-powered medical scanners; £111 million to help provide 700,000 more emergency dental visits and £365 million to fund breakfast clubs in all primary schools.
The rest will go to so-called «Barnett implications», that is, additional funding provided to the administrations of Scotland, Wales and Northern Ireland as a result of policy changes that have funding implications.
Eliminating the source of revenue for such a policy would mean that Labor will have to explain where the money will come from if it decides to keep announcing new tax cuts.
However, a further complication is that the move could again draw attention to the tax status of Mr Sunak's wife, Akshata Murthy, who was revealed to have been using non-resident status in the spring of 2022.
Mrs Murthy, whose father lives in India and is a billionaire, then gave up tax status. At the time, Mr Sunak criticized the focus on the issue, responding to «nasty smears».
There are concerns that The non-home announcement could reignite debate over the tax affairs of Rishi Sunak's wife Akshata Murthy. Photo: AP Photo/Jon Super
On Wednesday night a Labor source indicated this could well be their line of attack, saying: «Let's see if Jeremy Hunt can convince Rishi Sunak to steal another Labor policy.»
In the 2015 general election Ed Miliband, then leader of the Labor Party, surprised the Tories by promising to abolish non-home status.
Tory strategists later admitted that this statement had reached the public and that they were trying to change the subsequent national conversation with the recognition that it had a political impact.
Non-resident status rules allow those within the scope to avoid paying UK tax on foreign income or capital gains for up to 15 years, provided they do not bring the money back to the UK.
Why abolition of non-resident status is not a panacea Read more
However, at some point, costs do start to take their toll. For example, people who have lived in the UK for seven of the previous nine tax years must pay £30,000 per year.
HM Income & There were 68,300 non-residents in 2021, according to Customs. How many of them would remain if the status were revoked is a question economists have long debated.
Last summer, academics from the University of Warwick and the London School of Economics estimated that the move would raise an extra £3.6 billion a year for the Treasury.
But some economists argue that the flight of rich people to other countries will significantly limit the government's financial potential.
A Treasury spokesman declined to comment.
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