They’re off! The millionaires are taking flight in droves, chased away by Labour’s budget plans. Day after day, rightwing thinktanks and media grow more demented in their attempt to frighten the wits out of the chancellor. “Number of millionaires in the UK to fall by a fifth,” warns the Times, echoing the Telegraph’s “Britain to suffer biggest exodus of millionaires in the world”, reporting the rightwing Adam Smith Institute’s “millionaire tracker” scare.
Day after day, the old enemy pounds away: “Labour’s plan to punish the rich is about to drive Britain into the ground,” as one Telegraph commentator put it. The pile-on is joined by wealth management companies offering self-interested evidence. The Times front-page splash, which warned the rich were “ready to quit UK over budget tax threat”, cited a company offering relocation services to high-net-worth individuals that has experienced a 69% jump in inquiries. Well, they would. My inbox is full of wealth managers’ warnings about Labour’s inheritance “tax grab”.
Would they really flee? History is the best guide. This same old threat is always levelled over any check on the soaring wealth of the richest in Britain, but research shows that rich people rarely follow through. An LSE report published in January, Tax Flight? Britain’s Wealthiest and Their Attachment to Place, strongly suggests they are going nowhere. On surveying those in the top 1%, it found none actually planning to migrate. After all, the top 1% have no reason to complain after doing astoundingly well since 2010. Liam Byrne’s book The Inequality of Wealth shows they have made 31 times more wealth than the other 99% during the Tory years. While the rich got richer, real-terms wages flatlined.
Why are so few of the super-rich likely to leave? The LSE research finds them deterred by career risks, the administrative burden of moving, family upheaval, attachment to the places they call home (predominantly London’s zone 1). They value London’s unparalleled cultural life, and “expressed a snobbery about tax-advantageous destinations as boring and culturally barren”. The Cayman Islands just can’t match Chelsea or Mayfair.
Devere Group wealth management is one of many commenters in my inbox, with 100,000 clients around the world, mostly British expats. I interviewed its high-net-worth owner and chief executive, Nigel Green, about his lifestyle for my book with David Walker, The Lost Decade. Based in Dubai, he said: “I have a nice house but I’m not there often.” He lived, he said, “mainly on planes”. What were his pleasures? He sometimes flew to football matches or Formula One races, but had no hobbies. What about philanthropy, often a justification for high earners? “Not really. I have run marathons for charity in the past.” There is an odd aura of the extreme miser about many whose tax avoidance turns them into exiles from home.
Charlie Mullins of Pimlico Plumbers left with a noisy flourish last month to Spain and Dubai. (Does he know that, unlike the UK, Spain has an annual wealth tax?) We should be grateful to Guy Hands, founder of the private equity firm Terra Firma, for his honesty in admitting publicly that tax flight had been a bad mistake. He bolted to Guernsey, with its 20% flat tax rate, in 2009, when Labour raised the top rate to 50%. “For me it was a disaster,” he wrote last year. Without close proximity to the world of high finance, he said: “I lost the flow of the market.”
A study of HMRC records by Arun Advani, David Burgherr and Andy Summers following the last cut to non-doms’ tax relief shows that, despite the threats, just 5% left – and the ones who did leave were those paying the least tax in the first place. Non-doms are the most footloose, with close links to other countries: the British rich are even less likely to flee. And even when people leave, there are ways to retrieve capital gains. A report published this week by the Centre for the Analysis of Taxation showed how an “exit tax”, which is imposed by almost all G7 countries, could bring in £500m a year. The chancellor, Rachel Reeves, is expected to raise capital gains tax significantly. Even if the threat of rich flight turns out to be true, an exit tax would pluck some golden feathers as they go.
For all the daily harangues and scares, Reeves looks as if she’s not for turning. Holding firm on a more rational accounting for debt could allow an extra £50bn for capital investment in green energy, housing projects and repairs to dilapidated NHS infrastructure. For day-to-day spending, the Institute for Fiscal Studies says she needs to find £25bn extra tax to stop austerity cuts to stricken public services left by Jeremy Hunt. When Keir Starmer said there would be tax rises and “those with the broadest shoulders should bear the heavier burden”, the public agreed. Dangerously disillusioned, people now think the super-rich have more power than government. That ought to worry anyone about the precarious state of democracy.