The City – way wide of the mark on domicile

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The Observer seeks to report objectively. As such, as part of their coverage of the domicile rules they gave
John Jay, New Star Asset Management's development director, an opportunity to defend the presence of non-domiciled billionaires in London.

He made three arguments. First, billionaires spend money here, injecting wealth into our economy. Because they demand the best he said this improves the UK's skill set. In addition, their wealth 'trickles down' through the economy.

Second, he said the non-domicile laws concentrate global business decision-makers in London. This means huge business deals are done in London, which benefits our finance sector.

Third, there is a cluster effect which consolidates the City's position as the global centre of financial innovation.

He recognised the counter arguments (which he blamed on socialists, as if mere mention of the word would gave rise to instant distaste on the part of all Observer reader) but said billionaires pay for their own health and education, and so don't free ride any more than they inflate house prices, which he said were caused by planning constraints and the English distaste for high-rise living, not an influx of billionaires.

I have to be candid (as ever). These arguments make no sense at all. I'm astonished an intelligent person trots them out. First, there's no evidence that billionaires bring much of their money here. They keep it offshore for the simple reason that if they do bring too much here it would be taxed. So argument #1 is wrong. And as for the claim that excellence is created as a result of the spending of foreigners in London, that's a simple insult, as much as its insulting to claim trickle down works when anyone who has ever studied this issue knows that this 50 year old argument is simply not supported by data anywhere.

The second argument is as hollow. People can fly in and out of London (and most non-domes do, often). It's not the presence of non-doms that creates the expertise (if that's what we should call it) in the City of London. The causation is the wrong way round it. It's the City of London that attracts the non-doms by its expertise in helping them not pay tax on what they own. And the fact that the City is over-heated in the UK economy (which is why we're now a tax haven according to an IMF study) is what causes over-heating in the UK housing market because it's City bonuses that are fuelling demand for 'buy-to-let' properties that have driven up house prices beyond the reach of the vast majority of first time buyers in the UK. So this can be blamed, in part, on the non-doms (many of whom also work in the City).

Third, do we want to be the centre of financial innovation when a) there's no evidence that financial dealing adds value in most cases and b) it does cause financial instability c) it requires no more expertise than pinning the tail on a donkey at a five year old's birthday party in many cases?

Finally, if John Jay thinks that health and education are the only things tax is for and that tax is a payment for services supplied, then he clearly fundamentally fails to understand the nature of the social contract.

I love business. I have no objection to profit, at all. Enterprise should be welcomed. But the non-dom rules foster greed, not risk, reward financial engineering not product development and spread social disharmony rather than social well-being which real jobs provide. There is no justice in them. Unless, of course, you work in the City. Then you're dependent upon them. I guess John Jay is. The rest of us want rid of them, as fast as possible.