Tories cost NHS and other public services £18bn by not scrapping non-dom tax break 9 years ago, Labour says

Labour has accused the Conservatives of depriving hospitals and other public services of £18bn by rejecting its calls to scrap tax breaks for non-doms” for the last nine years.

The party also hit out at the “mother of all U-turns” in its first full-throated attack on expectations Jeremy Hunt will steal one of its flagship policies in the Budget on Wednesday.

And in comments that will be widely seen as a reference to Rishi Sunak’s wife, Labour’s shadow health secretary Wes Streeting said the prime minister had been “wedded” to the loophole for too long.

Akshata Murty hit the headlines two years ago when The Independent first revealed that she was a non-dom. In response, Ms Murty, whose family business is estimated to be worth around £60bn, announced that she would start paying British taxes on all her worldwide income.

Despite previously arguing the move would drive high-earners overseas, the chancellor is considering abolishing the loophole for wealthy foreign nationals.

The about-turn comes as he scrabbles to find money for tax cuts in a desperate bid to woo disgruntled voters.

Rishi Sunak with his wife Akshata Murty, who was a non-dom (AP)
Rishi Sunak with his wife Akshata Murty, who was a non-dom (AP)

But a new analysis by Labour, shared with The Independent, says schools and hospitals could have benefitted from billions if ministers had abolished the tax break in 2015, when the Opposition first pledged to scrap it under then-leader Ed Miliband.

Labour analysed 2023 research by academics at the London School of Economics (LSE) and Warwick University, which found abolishing the non-dom rules would raise around £2.3bn a year. Adjusting in line with price changes, the party says the Exchequer has missed out on £18bn in lost tax revenue since 2015.

The figure is around a tenth of the NHS’s annual budget, and equivalent to its yearly drugs bill, according to a report last year by LSE, the London School of Hygiene & Tropical Medicine (LSHTM) and the University of York.

Wes Streeting, Labour’s shadow health secretary, said: “The Conservatives have thrown everything at defending the non-dom tax status for the past decade, while our schools and NHS have deteriorated. That extra investment could have provided the doctors, nurses, and equipment our NHS desperately lacks today. The Tories chose to keep billions of pounds in the pockets of the wealthiest rather than our public services.

“It would be the mother of all U-turns if they reversed their decade-long position now, and far too late for so many patients and schoolchildren. Rishi Sunak should explain why he was so wedded to the non-dom tax status for so long.”

The Treasury and No 10 declined to comment.

Jeremy Hunt is being urged to increase defence spending  ahead of his Budget announcement (PA Wire)
Jeremy Hunt is being urged to increase defence spending ahead of his Budget announcement (PA Wire)

Mr Sunak and Mr Hunt were forced to rip up their Budget plans earlier this week after the spending watchdog warned they were unaffordable, The Independent understands, prompting expectation they will opt for more revenue-raising measures.

But in November 2022, shortly after he became Chancellor, Mr Hunt hit out at calls to scrap the status, saying: “These are foreigners who could live easily in Ireland, France... they all have these schemes. All things being equal, I would rather they stayed here and spent their money here.”

He added that he was “not going to do anything that’s going to damage the long-term attractiveness of the UK, even though it gives easy shots to opposition parties”.

And last year, Mr Sunak attacked Keir Starmer over the policy at prime minister’s questions, saying: “He talks about this non-dom thing. I think he’s already spent the money that he’s claimed he’s raised on five different things. Because it’s the same old Labour party – they’re always running out of other people’s money.”

Mr Hunt is facing intense pressure from MPs on his own benches to offer voters tax cuts in the run-up to the general election.

Some Tory MPs privately concede their party would need a “miracle” to win, after trailing Labour in the polls for two years.

Many are fearful the trouncing could be so bad it could consign the party to oblivion for a decade or more.

Mr Hunt is also facing pressure from the defence secretary Grant Shapps, who has urged him to increase military spending to 2.5 per cent of GDP in the budget.

He joins other senior Tories, including former prime minister Sir John Major, who believe the UK needs to ramp up support for the armed forces as war rages on the edge of Europe and tensions rise in the Middle East.

Mr Hunt is expected to resist those calls, however, after his fiscal “headroom”, the amount he theoretically has to spend, fell.