It has been just over twelve months since Britain abolished the non-domiciled tax regime, and the political class which engineered the change has, in the manner of a man who has lost a bet, gone deathly quiet on the subject.
There has been no triumphant statement of revenue raised. There has been no celebratory press release on “fairness restored”. There has, instead, been a series of releases from rival Mediterranean and Gulf jurisdictions, each one trailing the arrival of another set of British residents who used, until recently, to be ours. Italy is now the largest single beneficiary. Dubai is second. Switzerland, despite the snow, is having a banner year.
I am not, before any reflexive ideological reaction sets in, an unqualified defender of the old regime. The non-dom system was, in places, indefensible. It allowed, for instance, multi-generational use of the resident-non-domiciled status by people whose families had not seriously been domiciled abroad for decades. The 2017 deemed-domicile reforms, the ones the previous government did, against considerable lobbying, get right, closed most of the worst abuses, and at the time I supported them.
What we have done in the last twelve months is something quite different. We have, in effect, told a large group of internationally mobile high-earners, many of them not Britons at all, but global figures who chose, in the way that talented people sometimes choose, to put their family lives, charitable foundations, art collections and businesses in this country, that we no longer particularly value their being here. They have, for the most part, taken us at our word.
The figures, where they exist, are sobering. HMRC quietly published, last month, a 9 per cent year-on-year decline in stamp duty receipts on properties above £5 million, predominantly in central London. Mayfair and Belgravia office rents, which had been holding up against general London weakness, have softened in the last two quarters in a way that estate agents are too professional to attribute publicly to anything in particular. London philanthropic giving, the donors’ list of every major arts institution and many of our hospitals, has shifted; one major teaching hospital trust I know of has lost 14 per cent of its annual donor income. The Treasury, of course, does not collect a separate line item for charitable receipt loss as a result of policy change, so this number does not appear in the Office for Budget Responsibility tables. It will, however, appear in the closure notice of any number of smaller charities by 2028.
Then there is the City salary effect. A surprising number of Goldman, JP Morgan, and Citadel London-based partners have shifted their booked location to Milan, Geneva, or, increasingly, Dubai. Their families, in many cases, follow. The schools they used to fill in central London have noticed; admissions to the major preparatory schools fell, last September, by between 4 and 7 per cent, the largest single-year drop in living memory. The London restaurant scene, which depends on the £200-a-head business diner more than it likes to admit, is feeling the absence in real time.
I write this not in defence of any particular individual, but because the cumulative effect, and this is the part the Treasury repeatedly underestimates, is large, slow, and politically unmeasurable. There is no rally for the loss of a non-dom. There is no by-election that turns on it. There is, however, a slow grinding-down of London’s appeal as a global wealth hub, and that appeal, like the appeal of a great restaurant, is built up over decades and lost in a matter of years.
What does the Treasury say to all this? Privately, and I have asked, it says, broadly, two things. First, that the absolute number of non-doms is small. Second, that the headline revenue raised by the abolition was “in line with forecast”. Both of these things may be true. They are also irrelevant. The non-dom system was never, primarily, a source of direct revenue. It was a magnet. The charitable giving, the property purchases, the cultural patronage, the wealth-management industry that grew up around it, the hedge funds that anchored in London because of it — these were the second-order effects. They are the things you cannot put back together once you have decided, in a fit of theoretical even-handedness, to dismantle them.
There is, finally, a political point. Nigel Lawson once observed that the difficulty with tax policy is that revenue has consequences and consequences have lag. The current Chancellor will not be the one paying the bill for the loss of the non-dom regime. That bill will land, in 2028 or 2029, on the desk of someone else, who will inherit a London that has lost, quietly, a meaningful slice of its global gravity. There will be no headlines. There will only, slowly, be fewer people in the room.
Italy, by the way, will publish its end-of-year statistics on incoming high-net-worth residents in a few months. I would put a small wager, and I am a sober man, that it will set a record. We have, between us, given Rome the most expensive Brexit dividend it never asked for.
