Is Rishi just too rich for politics?

9 April 2022

6:20 PM

9 April 2022

6:20 PM

The obvious and perhaps only way out of this mess for Rishi Sunak was for his wife to pay double taxation: that is to say, to be taxed in India for any income on her 0.9 per cent stake in Infosys, the $100 billion company set up by her dad, and then taxed in the UK too. She doesn’t make this point in her statement. To talk about double taxation would sound like she’s complaining and already the idea of the Sunaks being irritated by questions about their tax affairs is rebounding on them.

The Chancellor might be privately fuming, saying this double tax has never been required of anyone before. Is this to be the new test for anyone in public life? But, as I say in my Daily Telegraph column, there has never been a Westminster Wag like Akshata Murthy. A Chancellor whose family wealth exceeds that of the Queen is a scenario that was always going to raise issues. So might her offer of voluntary double taxation put an end to it? Or is the real problem that Rishi is just too rich for politics?

Britain tends to be no country for reverse snobbery, which is why Labour’s class-war attacks always misfire. Wealth, here, tends to cause more interest than resentment and no one really minded that Sunak, a self-made multi-millionaire in his own right, would move into (and, from his own pocket, redecorate) 11 Downing Street with a wife who was worth more than half a billion quid. That didn’t matter. What mattered was his economic handling of the pandemic, his creation of a furlough scheme that will for good or ill define his time in office and whether he could navigate Britain through the economic hazards that were certain to follow the pandemic.

The navigation grew tricky. After going along with the PM’s spending requests, he saw it as his mission to wean the Tories off debt-financed spending – so he insisted that National Insurance rises pay for No. 10’s care home plan. That went down badly, inflation went up and his approval rating down. Then came the questions about his wife’s financial affairs: did her company still invest in Russia? His response – rather snappy, saying she is not a public figure and doesn’t have to answer such questions – seemed to expose a vulnerability. Which, naturally, his opponents kept pummelling away at. Her non-dom status was incendiary, leading to the scandal.

Wealth, in itself, is not a bar to doing well in British politics: Rishi’s riches will not be held against him. The problem in politics is that the super-wealthy tend to be super-careful about tax exposure, using methods which – while legal and above board – sound dodgy in politics. This rule is fairly well established. Every so often we see a data dump from the Cayman Islands or some such where people conducting perfectly legal global business are named and shamed as tax evaders. In fact, they are tax avoiders – but the difference doesn’t matter in Westminster. The words ‘non-dom’ is toxic, as are the words ‘offshore’ and ‘tax haven’.

This could be Sunak’s exposure now. Those with assets split globally often want to pay tax by jurisdiction: his wife had been paying Indian tax in India, American tax on her Santa Monica assets and UK tax on UK earnings. There are complicating factors: Indian capital movement laws don’t allow people like her to move her assets under UK tax jurisdiction as India needs the money. When global financial holdings are managed, it’s often done in a tax haven: not to avoid tax, but to avoid double taxation. Or to avoid taxes on a transaction when the proceeds may later be reinvested. But if you touch a tax haven, you can be portrayed as being dodgy. I’d be surprised if Fleet Street was not going after Sunak and Akshata Murthy now to see if – in their career of assembling such fortunes – they availed themselves of any arrangements that can be made to look dodgy.

Sunak should have got ahead of this row by declaring his wife’s status as soon as he entered government. MPs are banned from being non-doms so there are obvious issues if their spouse is a non-dom. The fact that this was kept secret (the Cabinet Office was told but the PM is letting it be known he was not, raising questions about whether Sunak was straight with him) speaks to the problems it was going to cause. As you read this there will be at least three dozen investigative journalists going through accounts registered in far-flung lands to try to document the Sunak tax archipelago and find any new details. So Sunak should try to get ahead of the next round of investigations by making sure there are no more secrets left to unearth.

Fundamentally he has a good story: he made his own money fairly through his talent. But can his opponents make him look shifty? That depends on whether he can get ahead of them; how open he can bring himself to be about his family’s financial situation: issues that he strongly feels should remain private. So this story may have some way left to run.

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