The Week in Business: Reeves tries to rescue the non-doms
It’s a funny old world when the pleas of pensioners, farmers and shopkeepers fall on deaf ears but a Labour chancellor flies to Davos to break the news that she’s “listened to the concerns of the non-dom community” – and will be watering down her assault on their tax arrangements.
Let’s take a look at the mega rich, and we can start with the news that nearly 11,000 millionaires left the UK in 2024 – many of whom would have had non-dom status which protects ultra rich foreign nationals from paying tax in the UK on their overseas earnings and wealth.
At least, that’s how it worked for 200 years before the government followed through with its commitment to end the special status – building on work that began under the previous government.
In case you’re of the view that this country can do perfectly well without the globally mobile mega rich, consider that research from the Adam Smith Institute this week calculated that between them those 11,000 newly departed millionaires paid the same amount in tax as half a million average UK taxpayers, meaning the Treasury will need to find 500,000 new taxpayers to make up for the loss.
That’s quite a chunk of change, and perhaps explains why the Chancellor is looking again at some of the rules she announced in her Budget.
But this is closing the stable door after the thoroughbreds have bolted. Wealth advisors told Morning Wire this week that the tweaks are too little too late.
But there’s something else we can take from the Chancellor’s exercise in damage limitation and it’s important; a crack has opened up in the Budget.
Reeves says she’ll table amendments to her own Finance Bill to accommodate the changes – and so a precedent is being set; changes can be made, partial u-turns can be considered.
And this has not gone unnoticed.
Farmers sense an opportunity
Farming groups last night jumped at the chance to say what about us? Their argument goes that as the new inheritance rules on family farms have been properly scrutinised, it’s right and proper that the government rows back on the policy.
In this battle the farmers have some unlikely new allies: the country’s biggest supermarkets.
Lidl, Tesco and Aldi have joined Asda in demanding a consultation into the hugely controversial decision to levy inheritance taxes on family farms – warning that the policy risks smashing the confidence of British farmers and undermining their ability to invest, with grave consequences for food security and the rural economy.
They say the policy should be paused while a proper review is carried out. The government should listen to them.
Supermarkets of course are facing their own difficulties thanks to government policy; Sainsburys this week announced 3,000 job cuts in response to the rise in National Insurance and labour costs – and they are not alone.
Unemployment has risen as businesses put into action what they’ve long been telling economic surveys – the Budget has made it harder and more expensive to employ people, so they’ll have to employ fewer people in addition to raising prices and cutting costs.
This was entirely predictable and therefore entirely avoidable.
Warning lights flashing red
Just today, the latest Red Flag Alert issued by insolvency specialists Begbies Traynor reveals that the number of companies facing critical financial distress has climbed 50 per cent since the Budget, with 46,000 businesses entering distress in the last quarter of last year – with the hospitality and retail sectors suffering the most.
So it’s been another week in which the government promises growth tomorrow while ignoring its death throws today.
Big moves on infrastructure investment – including new runways at our major airports and regulatory changes to stop environmental concerns from holding up new housebuilding – are excellent ideas, but they weren’t in Labour’s manifesto – which devoted exactly 20 words to the aviation sector, focusing on the promotion of sustainable fuels…
…so, either they always planned to back airport expansion but decided to keep it a secret, or they’ve reached for the policy now because they’re in desperate need for some pro growth news. Either way, it doesn’t exactly speak to the existence of a coherent economic strategy.
I can’t shake the idea that they’re making this up as they go along – and if that’s the case, well then we’re in even more trouble than I thought because this is not the time to not have a plan.
Warning lights are flashing red, unemployment is rising, business and consumer confidence have crashed, it’s tough out there.
It remains the case that this is a brilliant country powered by exceptional businesses, entrepreneurs, founders, farmers, risk-takers and shopkeepers – but the government has taken them for granted, and is now taking them for fools.