3 Mar 2010

Hague v Harman: watch out for Lord Ashcroft references

William Hague is standing in for David Cameron at PMQs today because the Prime Minister has said he can’t attend – his excuse is the state visit of the South African president. Some may wonder if he is simply swotting up for the Iraq Inquiry on Friday.

Harriet Harman, standing in for Gordon Brown in the Commons today, will no doubt be invoking the name of Lord Ashcroft at some point. William Hague did, after all, think it fitting as Tory leader to put up Lord Ashcroft for a peerage when he was a tax exile (a particularly celebrated one – it would be odd if Mr Hague back in 1999 was the only person in political circles who didn’t know that).

What really happened with Lord Ashcroft and his tax status? Cabinet Office papers have found their way into the newspapers today.

I get the very strong impression that the authorities vetting Lord Ashcroft were very focused on the fact that he was resident abroad, focused on the need for him to be resident here, surprisingly unfocused on tax status and ill-informed about what the different applicable UK tax statuses were.

Lord Ashcroft himself seems to have, in a hurry, signed a letter that used the potentially fatal buzz-phrase “permanent residence” (his letter to William Hague of 23.3.2000) but no doubt an army of seasoned tax and legal experts piled in quickly after that to make sure that this was “clarified” to give a rather different assurance, one that would allow Lord Ashcroft to pay minimal tax as a non-dom.

The Honours Scrutiny Committee doesn’t seem to have focused on tax status. Retired senior civil servant, Sir Hayden Phillips, who signed off on the peerage after a chat with the Tory chief whip (today’s Times – p6) said he had no recollection of discussing tax status when checking whether he could sign off on the peerage.

Lord Ashcroft quickly repaired a line in the letter that opened him up to paying the “tens of millions of pounds” of tax that William Hague told Tony Blair he would be paying. He was sharper than the people who were trying to vet him.

He was not, you might think, terribly clear with William Hague about how much tax he would actually be paying. Either that or William Hague just came up with the “tens of millions” phrase off the top of his head.

The vetting of peers and restrictions imposed look like woolly operations conducted by people with no firm grasp of tax law. That changed a few weeks later in May 2000 when the Lords Appointments Committee was set up and, I understand by accident, got a tax expert on board as a member of the team.

An important footnote to all this: talk to a tax inspector and they’ll say that before Labour came to power in 1997, “non dom” status was something that was barely on the radar.

“Domicile”, the tax inspectors used to be taught, is where you expect to be buried or “where your heart is” (the phrase used by Lord Ashcroft on his website to describe Belize) was the actual phrase one inspector I spoke to recalled from classes.

What changed was that Gordon Brown spotted an opportunity to exploit the little used “non dom” status available in the UK tax system and lure in Russians, overseas City financiers and others – to boost London as a finance centre and bring in some money that might otherwise go elsewhere.

So…the growth of non dom status is a phenomonon of the New Labour years and Lord Ashcroft is now its best known beneficiary. How about that?

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