Speaker 1: Bloomberg Audio Studios, podcasts, radio News. Welcome to in the City.
Speaker 1: Each week we unpack a story that's crucial to the
Speaker 1: world's financial capitals. I'm at alegra Stratton. So okay, we
Speaker 1: know that it's a big news week, but interestingly, uncertainty
Speaker 1: in the Middle East has not yet had a huge
Speaker 1: effect on the markets. We also are not unaware promise
Speaker 1: you that there's been a G seven and out of
Speaker 1: that the UK did get some progress on its trade
Speaker 1: agreement with the US. But even so, what has got
Speaker 1: many people talking in the city is what an earth
Speaker 1: may or may not be happening to the Chancellor's crackdown
Speaker 1: on non doms. This week we returned to that decision
Speaker 1: that Rachel Reeves made to essentially end the non dom status.
Speaker 1: There are rooms that she may be about to do
Speaker 1: a U turn.
Speaker 2: Welcome to the City of London.
Speaker 1: The City, the City of London. We leave mine a
Speaker 1: gap between the and the financial heart of the country.
Speaker 2: The City, the City.
Speaker 1: Welcome to in the City. Stand clear of the doors. Pease. Okay,
Speaker 1: So look, some news outlets are reporting Rachel Roofs could
Speaker 1: reverse a decision to charge inheritance tax on the overseas
Speaker 1: assets of non doms. We're going to get into how
Speaker 1: substantiated those claims are in our conversation shortly, but before that,
Speaker 1: let's have a quick look at the impact of the policy.
Speaker 1: Our latest reporting shows that the exodus of non doms
Speaker 1: could lead to a net drain on the UK economy,
Speaker 1: with estimates suggesting we could lose thousands of jobs and
Speaker 1: up to twelve point two billion over the coming four years. Now,
Speaker 1: the journalist behind that is Ben Stupples and he joins
Speaker 1: us in the London studio. Ben covers the world of
Speaker 1: ultra wealthy for Bloomberg News in London. Ben Hi, Hi.
Speaker 1: All right, Ben, Before we get onto whether or not
Speaker 1: your sources believe that there is this U turn coming
Speaker 1: on the non don status, quickly, just give us a
Speaker 1: sense of how much of an impact it's had.
Speaker 2: Yeah, thanks, sir legre. It certainly had an impact, and
Speaker 2: let's just unpack that for a second. Being a data business,
Speaker 2: we sort of tried to take a data driven approach
Speaker 2: to this. So what we looked at was, in the end,
Speaker 2: thanks to my colleague Max Harlow, very talented data guy
Speaker 2: in our newsroom, we analyze five million filings in Companies house.
Speaker 2: That's a pretty comprehensive data set. And what the question
Speaker 2: we asked within that was, okay, there are certain filings
Speaker 2: you have to make if you are a director business
Speaker 2: leader in the UK, if you are going to live
Speaker 2: somewhere else. So we searched for that filing and we
Speaker 2: found that year on year, April twenty twenty five, the
Speaker 2: filings for that month were about seventy five percent higher
Speaker 2: than a year before. Now why is that important? That month?
Speaker 2: The non norm system ended. The concept of non dom
Speaker 2: ceased to exist from early April. So what we can
Speaker 2: see here, maybe for the first time, is a definitive signaling,
Speaker 2: an indication that not all is well with Britain's what
Speaker 2: I guess we could term billionaire economy. And we hadn't
Speaker 2: had that before. Now why haven't we had that? The
Speaker 2: way nondonms have to disclose, the way that they have
Speaker 2: the status and all that stuff, it's not like a
Speaker 2: normal tax payer. There's a bit of a lag in
Speaker 2: the time that HMRC, the UK Tax Authority, collects and
Speaker 2: publishes the data for that. So actually HMRC, on the
Speaker 2: back of US publishing a big story last week, said
Speaker 2: that they will put out the final numbers out in
Speaker 2: twenty twenty seven. So in the meantime we're sort of
Speaker 2: stuck in this sort of a bit of a guessing
Speaker 2: game and we're just doing our very best to try
Speaker 2: and use the data that exists right now to try
Speaker 2: and have a sense of is this really working from Britain.
Speaker 1: So, Ben, do you from the sources you have in
Speaker 1: the Treasury, do you think that the Financial Times that
Speaker 1: first reported there was a U turn coming on this
Speaker 1: end to the non dome status or certainly you know
Speaker 1: substantial tweaks do you think that that's incorrect or do
Speaker 1: you think something's afoot?
Speaker 2: I can certainly understand why this might be on a
Speaker 2: Racha Reaver's desk in the Treasury. Why because first and
Speaker 2: foremost this is the topic causing the biggest heartburn, is
Speaker 2: what the Financial Times reported. Actually that's the word they use, heartburn, heartsache.
Speaker 2: It is this is the biggest problem for the non
Speaker 2: dome changes. Why is that? It is because we previously
Speaker 2: we're actually quite deliberate in saying to nondomes we're only
Speaker 2: going to text you on what's happening in the UK.
Speaker 2: Create a business here, you pay tax on that. Everything
Speaker 2: else that's overseas shares in your holding company. Let's say
Speaker 2: you're an Indian steel tycoon or a European tech entrepreneur.
Speaker 2: Don't worry about that stuff. Just worry about what's getting
Speaker 2: on in the UK. If you live here long enough
Speaker 2: fifteen years, yeah, you'll eventually pay full UK tax on that.
Speaker 2: But what raych Reeves has done is go after from
Speaker 2: pretty much. Instead of fifteen years, we now have four years, right,
Speaker 2: so that's a big deal. We've slashed the time that
Speaker 2: people now exposed UK tax and the overseas assets, and
Speaker 2: so it was the biggest issue and it was raising
Speaker 2: only for about five hundred million according to Office for
Speaker 2: Budget Responsibilities of Forecasts, out of an overall package that
Speaker 2: was meant to raise more than thirty billion. Now let's
Speaker 2: think about this from a sort of pragmatic power politically.
Speaker 2: You know, how does this look in the treasury and
Speaker 2: beyond When you're also hiking taxes for inheritance tax for
Speaker 2: British farmers, you're also doing it for UK business entrepreneurs. Right,
Speaker 2: so we've also hiked you know, roch to Reeves said
Speaker 2: those are the broadest shoulders must bear the brunt of
Speaker 2: all this business owners are getting a massive whack on
Speaker 2: inheritance tax, So we don't right now, we don't know
Speaker 2: for sure if this is going to come down the line,
Speaker 2: you know. Basically this is all what we can define
Speaker 2: it now is I guess speculation ahead of the next budget,
Speaker 2: which will be based on previous years October November time,
Speaker 2: So that's the drum of speculation is already starting over
Speaker 2: what was announced only months ago, right and just being
Speaker 2: enacted into law. And this is clear. This is this
Speaker 2: is actual legislation. So we'd need another Act of Parliament too,
Speaker 2: as far as far as I understan it, we need
Speaker 2: another Act of Parliament to amend all these and to
Speaker 2: make any other big wholesale changes.
Speaker 1: The reason why this is a hair that's convincing to
Speaker 1: have running is that there is a now a recent
Speaker 1: history of U turns, and so it feels completely conceivable
Speaker 1: that if evidence comes in that it's backfiring, that she
Speaker 1: would want to reverse track. But you're also right that
Speaker 1: she's also got pressure from her left in the Labor Party,
Speaker 1: given what they're doing with farmers and so on, to
Speaker 1: keep up the sort of parity. We can't know now,
Speaker 1: and we won't know now what they will end up doing,
Speaker 1: But I wonder whether it's you can give us insight
Speaker 1: into whether it would even help if she were to
Speaker 1: do this. I mean, what I find interesting about your
Speaker 1: reporting are the analysts who speak to who who say, look,
Speaker 1: there's a trust issue here now, so say they did
Speaker 1: reverse on this. What's to say, given everything any intelligent
Speaker 1: person is reading about the state of the public finances,
Speaker 1: what's to say, yes, she gives non doms a reprieve now,
Speaker 1: but what about in another year when things are sticky,
Speaker 1: perhaps even harder fiscally.
Speaker 2: You're completely right doing. You asked me what my sources
Speaker 2: have said in the back of this. We did survey
Speaker 2: a lot of private wealth sources yesterday, asking hey, did
Speaker 2: you see this coming? A lot of them said it
Speaker 2: frankly bent. The horse has already bolted, to quote one source,
Speaker 2: If Rachel Reeves does this now, it doesn't even matter. Really, Yeah,
Speaker 2: it's a big issue. But actually, what we've had here
Speaker 2: is it's not a single decision that made non doms go.
Speaker 2: Let's just rewind the tape a little bit. It wasn't
Speaker 2: actually the labor who came out with these moves in
Speaker 2: the first place. It was the Tories in March twenty
Speaker 2: twenty four, and then richids soon at Courts the election,
Speaker 2: and then we get Labor saying you know, we're going
Speaker 2: to do that, and we're going to go even further.
Speaker 2: So that was in July. So I believe it's in
Speaker 2: the build up to July with Labor winning the election,
Speaker 2: and then after a lot of non doms went okay,
Speaker 2: I was thinking of going, but now I'm definitely going
Speaker 2: to go. And then we had rach Reeves standing up
Speaker 2: at the budget saying I'm doing this. So that was
Speaker 2: almost like a triple whammy. It wasn't like sort of
Speaker 2: like a one stop hit, right, a sort of a
Speaker 2: hit and run legislative sort of move, a.
Speaker 1: Systematic ratcheting up of pressure on this group.
Speaker 2: Yeah, and then the broader context here is a lot
Speaker 2: of non dums were already settled even before that. Why
Speaker 2: because you know things about Brexit and the fallout of that.
Speaker 2: You think about We've had half a dozen prime ministers
Speaker 2: within the past decade, So Britain's traditionally attracted the global elite.
Speaker 2: Why because of the political and economic and legal stability.
Speaker 2: They always come up when he talked ultra and it
Speaker 2: worths about why they love London, why they love living
Speaker 2: in Britain. We've actually pulled the rug from under their
Speaker 2: feet for those three reasons really over the last decade.
Speaker 2: And if Rachel reeves to bring it full circle, if
Speaker 2: ate to Reeve's and says, actually, I'm going to scrap
Speaker 2: all that inheritance tax stuff, the thing that I was
Speaker 2: really making a big song and dance over for nondoms,
Speaker 2: We're not going to do it now. It actually furthers
Speaker 2: that narrative that you can't really trust Britain now. You're
Speaker 2: not really economically and fiscally secure here.
Speaker 1: Yeah, you've got sort of a double vulnerability for her. One,
Speaker 1: it's your kind of lack of clarity and conviction in
Speaker 1: what she believes. And then secondly, you know, the direction
Speaker 1: of travel is that there's a hole in the public
Speaker 1: finances rather than don't worry the public finances are fixed.
Speaker 1: But just looking at the other jurisdictions that have really
Speaker 1: aggressively been pursuing the British ultra ultra high net worth individuals,
Speaker 1: as we say, rather than the super rich, which used
Speaker 1: to be the phrase a few years ago. And you've
Speaker 1: got Italy and cities like Milan, You've got Dubai. You've
Speaker 1: got Trump too, with his trunk cards or his golden
Speaker 1: visas trying to entice the rich to America with you know,
Speaker 1: the possibility becoming a US citizen quite easily. How much
Speaker 1: of these other offers much more attractive than the environment
Speaker 1: in the UK.
Speaker 2: Now, Italy is a really good example. Actually, this is
Speaker 2: a sort of a policy for them that's actually it's
Speaker 2: run through as far as I understand it, it's run
Speaker 2: almost through like a sort of central government hub. So
Speaker 2: it's very systematic and it's very consistent. You don't have
Speaker 2: the language in Milan. You do have to speak Italian
Speaker 2: all of the time, but I would say it's the
Speaker 2: closest sort of like for like, And they've got a
Speaker 2: more attractive regime now that's actually now fifteen years, which
Speaker 2: is what we previously had for a nonin regime. But
Speaker 2: now if you're in Italy you've got fifteen years and
Speaker 2: in the UK it's four. I mean, that's a pretty
Speaker 2: if you're looking at a spreadsheet, it sort of makes sense,
Speaker 2: and hey, life in Italy isn't that bad, and that
Speaker 2: this is a crucial thing as well. You can get
Speaker 2: around if you go the Milan Malplins if you've ever
Speaker 2: been there in some holiday as Allegra, you can get
Speaker 2: around pretty easily, you know, and you can get to
Speaker 2: London as well.
Speaker 1: What are you saying about London's public exactly? Yeah, and
Speaker 1: their inheritance tax regime is much more generous, isn't it.
Speaker 2: Yeah, that's a crucial one, Allegra.
Speaker 1: And I think that from the people that we have
Speaker 1: heard from on in the city in the sort of
Speaker 1: nine to twelve months, that this has been a particular
Speaker 1: acute problem. It is that inheritance tax aspect that has
Speaker 1: completely freaked out a generation of people who for whom
Speaker 1: it is very pertinent.
Speaker 2: Yes, in Italy has been very good on that. And
Speaker 2: even if you end up living in Italy for let's
Speaker 2: say twenty to thirty years, you set it down, you
Speaker 2: have your grand kids there, Well, are you exposed to
Speaker 2: forty percent?
Speaker 1: No? Not.
Speaker 2: I think it's about four percent top of my head,
Speaker 2: so massively difference. And just other jurisdiction I'd highlight jurisdictions.
Speaker 2: I would say Abu Dabby's done a very good job
Speaker 2: to buy is pretty strong that in terms of marketing themselves,
Speaker 2: Abi Dabi has a central government hub agency that actually
Speaker 2: is really I would say ruling out of the red
Speaker 2: carpet globally, but I would say they're not blind to
Speaker 2: the fact that, you know, London's a pretty active market
Speaker 2: for movements.
Speaker 1: So Ben just to kind of try and tie this
Speaker 1: all together and we do try it on in the
Speaker 1: city to be somewhat positive. If you were the Chancellor
Speaker 1: and you're looking at the numbers that you set out
Speaker 1: very clearly at the beginning of this odd what would
Speaker 1: be the smart thing to do to say, Look, I've
Speaker 1: obviously damaged trust, but I really need you guys to stay.
Speaker 1: Guys and girls to stay. You know, you are GDP
Speaker 1: critical to what I'm trying to do. What would you
Speaker 1: suggest she do with some credibility to actually keep them
Speaker 1: in London.
Speaker 2: The big elephant in the room is the fact that
Speaker 2: we scrapped our Golden visa regime in twenty twenty two
Speaker 2: because of we were keen at the time to clean
Speaker 2: out any Russian money that we didn't think should be here. Now,
Speaker 2: that was a big deal and we haven't replaced it
Speaker 2: since then. And you mentioned earlier that US President Donald
Speaker 2: Trump is making a big song and dance about Yeah,
Speaker 2: the Trump card, the US Golden visa, bring it in.
Speaker 2: You know, I'd be looking at that if I was
Speaker 2: both Racheries and Kirstarmer for that matter. It's interesting we
Speaker 2: did report that they were looking at some sort of
Speaker 2: strategic investor visa and that got a lot of tongues wagging,
Speaker 2: not just in the know private wealth community, but beyond that.
Speaker 2: You know, that's interesting. I think it's politically defendable for
Speaker 2: Starle and Reeves. You know, they came to powers saying
Speaker 2: they are keen for growth, that's their number one priority. Well,
Speaker 2: if you want someone from overseas to invest in Britain's infrastructure,
Speaker 2: which you know there's a broader economic benefit for that,
Speaker 2: right from the heighth of the low classes, that's defendable,
Speaker 2: I would say, and more possible than I would say
Speaker 2: doing anything wholesale change with the non dom stuff, where
Speaker 2: they'vehin their colors to the mask, they've said we're going
Speaker 2: to do this, and if they do anything to change it,
Speaker 2: then it speaks to you can't trust labor with the economy,
Speaker 2: you can't trust labor with all of you know, the
Speaker 2: non domb stuff, and it speaks to the broader issues
Speaker 2: that made non domsun settled in the first place.
Speaker 1: Ben, that's a brilliant place to leave it. Thank you
Speaker 1: so much and good luck with your reporting. Thank you,
Speaker 1: thanks for listening to this week's In the City from Bloomberg.
Speaker 1: This episode was hosted by me alegra Stratton. In the
Speaker 1: City is produced by Summersadi and Moses and with sound
Speaker 1: designed by Blake. Maple's Brendan Francis new is our executive producer.
Speaker 1: Special thanks to Ben Stupples. Please subscribe, rate, and review
Speaker 1: wherever you listen to podcasts.