Tuesday, March 02, 2010

Michael Ashcroft and a few errors of judgement

And so, the Right Honourable Baron Ashcroft of Belize has finally clarified his tax status and the sport begins. As usual, that sport is playing the man and not the ball. What do I think? Let's break it down into what I believe are the key issues...

The Residency promise

When the press release was issued notifying the media of the list of new Peers, there was a 'Note for Editors', and this is what it said;

In order to meet the requirements for a Working Peer, Mr Michael Ashcroft has given his clear and unequivocal assurance that he will take up permanent residence in the United Kingdom again before the end of the calendar year. He would be introduced into the House of Lords only after taking up that residence. These undertakings have been endorsed by the Leader of the Conservative Party and conveyed to the Prime Minister - and to the Political Honours Scrutiny Committee.

The important words here are 'permanent residence'. There was no commitment sought that his domicile would change, and none given. To be blunt, this looks like one clever, or at least well-advised, individual getting one over on the powers that be. If they didn't think about the question of domicile, they should have done. After all, we have no idea what the financial benefit accruing to Lord Ashcroft from his domicile status is, and that is rather important. He can be as resident if he likes, but if the majority of his income remains offshore, it isn't likely that it is being taxed here.

In that sense, based on the statement above, Lord Ashcroft has lived up to his commitment. It may not be terribly honourable, but then those responsible for reaching the agreement shouldn't have been so trusting.

Lawmaking and tax avoidance

At a time when David Cameron is talking about patriotic duty, it is astonishing that he has allowed the Ashcroft situation drag on as long as it has. The brutal fact is that a man who believes that his home is in Belize is potentially sitting in the Upper House, debating, scrutinising and voting on laws that affect all of us. Most ordinary people would find that in itself bizarre. The fact that he claims his domicile to be in that country too is even more difficult for them to swallow.

To be automatically considered non-domiciled in the United Kingdom, you must fulfil the following criteria;
  • you must be born outside of the United Kingdom
  • your father must have been domiciled outside of the United Kingdom at the time of your birth
  • you must have come to the United Kingdom for the purposes only of employment (including self-employment) and must intend to resume employment abroad when that employment ceases
Michael Ashcroft was born in Chichester, but as his father was a colonial civil servant, it is not impossible that he would qualify under the first two criteria. His activities in the House of Lords do not represent employment, but his directorships do. It is fair to say that his claim to non-domiciled status probably stands up.

But if they do, can David Cameron, George Osborne and the boys not see what the problem is here. Can you rightly claim non-domicile status if you are a Member of Parliament? Forget legislation, this is a matter of personal honour. If Conservatives cannot see the genuine issue here, are they likely to 'get it' in power? The idea that you can believe home to be one independent country and make laws for another is morally and ethically wrong.

Receiving funds from offshore

It is now accepted that taking contributions from non-residents is wrong, and the law was changed to prevent that, to provide greater clarity about the sources of income of political parties. So, what is different about taking money from those who are non-domiciled? In my view, it comes down to arrogance, whereby a rich person can buy influence, potentially using funds held offshore and away from the prying eyes of HM Revenue & Customs.

The Conservative argument that Labour take money from non-domiciled individuals too doesn't make their problems with Lord Ashcroft and Lord Laidlaw any less difficult. To try to mitigate your moral offence by implicating the next door neighbour in an equally horrid crime is not sustainable in the court of public opinion. Indeed, all it does is to besmirch the reputation of all politicians, some deserving, some rather less so.

They could instead propose legislation stating that political donations cannot be accepted from non-domiciled individuals, but I suspect that they won't.

In summary, I would argue that Michael Ashcroft should never have been given a peerage, an honour which consequentially gives you an opportunity to change the law of the land. The Conservatives should never have nominated him without a clearer demonstration of the fulfilment of his promises, and now that they have, we're stuck with him.

In all, it provides a nice big stick for people to hit the Conservatives with, and in the current climate, there'll be plenty of bruising ahead for them as this saga plays out.


Paul Walter said...

Well written, Mark

Mark Valladares said...


Many thanks, it's nice to get some feedback!

Anonymous said...

You are right - it is clearly wrong for someone to make laws for a country they do not want to live in, even if they consider themselves a citizen of that country only. Does Ashcroft have Belize citizenship? However, please remember that he has not claimed a penny of expenses and it is right for the Tories to point out that the Labour lords have.

Watchman said...

A slight logical problem here, since Lord Ashcroft pays his taxes on money earned in Britain. How is it right we should demand he pays taxes on money earned elsewhere: the tax should surely be paid there?

Mark Valladares said...


I'll take those points in order.

Anonymous, Lord Ashcroft does have dual nationality (British/Belizean) and is entirely entitled to that status. However, his claims to expenses are irrelevant if, as I believe, he should not be there in the first place. Your suggestion is rather akin to claiming that "well, he was kind to his mother". It isn't good enough.

Watchman, you clearly have little grasp of tax law as it relates to residency and domicile (that makes you pretty normal, I admit). It is clear from William Hague's statements at the time that he expected Michael Ashcroft to pay considerably more tax (tens of millions, it was claimed) than he had been up until then. If I have income overseas, I am expected to declare it in my annual tax return, and pay tax on it. Yes, I can claim double taxation relief, deducting foreign taxes paid, but I must pay the equivalent of the appropriate UK tax rate. That's because I'm domiciled in the United Kingdom.

Lord Ashcroft is resident in the United Kingdom, and is therefore taxed in Belize accordingly. Non-residents of Belize are only taxed on income received in Belize, and at 15%. As he would be paying 40% in the United Kingdom, he is effectively saving five-eighths of the tax which would be paid if he was domiciled here.

Effectively, he's having it both ways, as good tax planning will enable you to do. It isn't illegal. It is, if you are a British parliamentarian, immoral.