The crucial finance team has much work still to do

Rachel Reeves is to water down plans scrapping her non-dom tax rules amid concerns about the number of wealthy individuals deserting the UK. It must be true, because it’s being repeated everywhere — complete with a bland, non-denial from the Treasury: “The government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment in the UK.”

A key item under discussion is said to be the proposal to make non-doms’ worldwide assets liable to inheritance tax, or IHT, including those held in foreign trusts. There is no doubt many rich people have gone. One analysis by Bloomberg puts the number of company directors who have left at 4,400 in the past year. Examination of Companies House filings shows departures were 75 per cent higher in April than in the same month last year. The worst affected sectors were finance, insurance and property, all of them popular with non-doms. In the most expensive areas of London, stories abound of shuttered mansions, and a knock-on effect across restaurants, hair and beauty salons, car firms and all the other ancillary services.

The UK, once a favoured magnet for the world’s billionaires and multi-millionaires, has fallen off its perch. A recent Oxford Economics survey found that 60 per cent of tax advisers expect more than 40 per cent of their non-dom clients to leave within two years of Reeves ending their beneficial status. With them will go their families, close staff - and their money.

It was the latter that made previous governments, including Labour, seek to attract them in the first place. If they base themselves in Britain, they are more likely to spend and to invest here. That is why other nations are doing their level best to woo them. It’s what the Treasury means when it refers to the new regime being “internationally competitive”.

What is bizarre and shaming is that this administration did not see it coming. Seemingly, ministers did not realise that non-doms would quit. They did not appreciate that, in today’s world, rich people can move freely and easily and work from anywhere.

Either they are guilty of extraordinary unworldliness, deluding themselves that wealthy foreigners would carry on living in the UK merely because they like it here - ignoring the effect on their finances; or they simply did not care, and allowed political ideology to prevail.

Whatever the answer, they are now engaged in the sort of reversal and damage limitation exercise which is becoming all too familiar where this government is concerned.

The question now is: will it be enough?

Already, South Africa’s richest self-made woman Magda Wierzycka, the billionaire behind UK venture capital fund Braavos, has stated she will shelve plans to leave should the chancellor U-turn on IHT: “I would absolutely stay and it’s not about protecting my money from the tax man. I pay all my taxes, but South Africa has foreign exchange controls and I don’t know whether [my estate] would be able to pay the IHT bill under the current rules.” Whether others are so persuaded, and if Reeves does pull back entirely on IHT, remains to be seen. The problem for her and for Keir Starmer is that the tone has been set. Even if they do climb down, the feeling persists that this iteration of Labour (as opposed to that of Tony Blair, which famously declared it was “intensely relaxed about people getting filthy rich”) cannot abide well-off people.

The purging of the non-doms followed a pattern. It joined VAT on private schools, the removal of the winter fuel allowance, hitting farmers with their own new IHT bills, and other measures, aimed at the more advantaged end of society.