Labour Pledges to Clampdown on Tax Dodging to Pay for NHS Plans

Labour's shadow chancellor Rachel Reeves campaigns at Blackpool Cricket Club in England on April 5, 2024. (Christopher Furlong/Getty Images)

Labour has pledged to fund its NHS policies and free school breakfasts by clamping down on tax dodgers.

The party plans to raise an extra £5 billion a year by tackling tax avoidance by the end of the Parliament. These measures are meant to generate funding for the health care service and bring down NHS waiting times, as well as fund free breakfasts for primary school pupils.

“I will crack down on tax avoidance to fund more NHS hospital and dentist appointments, and free breakfast clubs for all primary schools,” said shadow chancellor Rachel Reeves.

Ms. Reeves said she had identified “funding streams” to honour Labour’s commitments to the NHS and schools. The money released by “taking on the tax dodgers” will bankroll more hospital appointments, new scanners, and extra dentist appointments, the shadow chancellor said.

Labour has also pledged to raise £2.6 billion over the course of the next Parliament—including £1 billion initially—“by closing the loopholes in [Prime Minister] Rishi Sunak’s non-dom plan.”

UK residents holding a non-domicile status may not have to pay UK tax on foreign income. In October last year, Labour leader Sir Keir Starmer announced plans to abolish the tax status of UK resident non-domiciled individuals.

The tax policy earmarked by Labour to fund its NHS strategy was then adopted by the government, with Chancellor Jeremy Hunt announcing plans to abolish the non-dom tax status in his Spring Budget.

In one of the Budget’s biggest surprises, Mr. Hunt said he was scrapping non-dom status altogether, rather than just restricting it as had been predicted.

Loopholes

“It took years for Rishi Sunak to U-turn and drop his opposition to abolishing the non-dom status. But buried in the small print of his plan is a £400 million-a-year loophole that will benefit some of the wealthiest people in Britain,” Labour said on social media platform X.

The current rules for non-UK domiciled individuals will end in April 2025. Tax breaks will be scrapped for residents who have lived in the UK for more than four years. The Treasury also wants to move inheritance tax to a residence-based system.

However, foreign assets put in an overseas trust before the April 2025 deadline will be permanently excluded from inheritance tax.

Shadow financial secretary to the Treasury, James Murray, has highlighted Britain’s historically high tax burden and its large tax gap. Closing the non-dom plan loopholes and tackling tax avoidance will release money to invest in HMRC, he said.

Labour hit out at the government for not doing enough to close the £36 billion tax gap, which represents the difference between the amount of tax owed and what the government collects.

The opposition’s policies on closing the gap include increase the number of tax compliance officers by up to 5,000 and digitising the tax office. Labour also wants to establish a wider range of tax schemes to be reported to HMRC under the disclosure of tax avoidance schemes regime.

In addition to other steps, these measures are meant to generate up to £855 million in additional funding for HMRC.

“Labour’s Plan to Close the Tax Gap will relentlessly pursue the money that is owed, with a plan to make sure people pay the right tax in the first place, and that directly tackles tax avoidance and evasion,” the party said in a statement.

In turn, the government last year set out funding for 700 additional debt officers, both in-house and from external collection agencies. Mr. Hunt said that government efforts are forecast to raise over £4.5 billion of tax revenue by 2028-29.

Labour said its policies will bring fruitful results for the NHS and will fund two million more NHS operations, scans, and appointments a year on evenings and weekends. The funding will also cover 700,000 urgent dentistry appointments and recruitment of medical workers.

“Over the course of a parliament, the measures announced raise almost twice as much as our NHS and breakfast clubs spending plans,” the party said.

It added that every policy put forward in its manifesto will be fully funded in every year.

PA Media contributed to this report.