Michael Fallon is MP for Sevenoaks and a member of the Treasury Select Committee.
A few years back the then governor of the Bank of England coined a metaphor. The City of London, he said, was like Wimbledon: we might not have the best players but we had the best tournament. Ownership wasn’t the issue; foreign banks might dominate the City or buy up all the British banks but London was where everybody wanted to play. And UK plc got the benefit.
A better analogy might be Silverstone. It’s our Grand Prix but it doesn’t have to be here. Many newer places – in the Gulf states, the Far East – would like to host one. Get the supporting infrastructure wrong – too much tax and tape – and Bernie gives it to somebody else.
That’s where the non-doms come in. Many are the people who make the City tick. They’re not all Greek shipowners or Russian billionnaires: they”re just as often the supporting cast.
And they’re highly mobile. They know how to live in Geneva or Dublin, Luxembourg or Dubai. Private equity houses or hedge funds don’t have to be in Mayfair.
Labour’s proposed tax would be disastrous for the City. It’s sent out a clear message that in seven year’s time we simply don’t want the non-doms here.
After eleven painful years, we expect Labour to be bad at tax. The pensions tax, the CGT fiasco, the stealthy shifting of millions into the higher bracket – these are politicians who’ve never actually understood how the real world works.
But the real lesson of the non-doms row isn’t for Labour – it’s for us.
An annual levy combined with a guarantee of no intrusion is certainly more attractive than Darling’s proposal. But it only gives certainty for a single Parliament – perhaps three or four years after our first Budget.
Non-doms who’ve chosen to work here are looking for certainty. They now see two policies, each of which is a proposal. They worry that either party could tweak its policy again.
We need to be careful about soft targets, careful about taxing anybody just because we need the money rather than from principle, and above all very careful not to do anything that might undermine the one bit of our economy that really works.