Is Sunak sunk?

If it is correct that Rishi Sunak’s wife, Akshata Murthy, has been claiming non-domicile status, then the Chancellor’s already diminishing returns on becoming Prime Minister are now sunk to oblivion. 

According to a cracking story in the Independent, Murthy has been using the perfectly legal non-dom tax status as recently as April 2020 – her husband became Chancellor in February 2020 and the MP for Richmond in 2015. 

Reading between the lines of a rather confused Treasury response on Wednesday night for comments on the story, it would seem to be true. A No 11 press spokesman confirmed that Murthy is “technically” a non-dom because she is an Indian citizen, and therefore under Indian law cannot be a UK citizen. The so-called “non-dom” status is used by individuals who live in the UK but who are considered under British law to be domiciled in another country which is their permanent home, and is a status that has to be applied for. 

Whether Murthy is technically a non-dom or not technically a non-dom, the status amounts to the same thing. It’s a device by which individuals can avoid paying UK tax on income from dividends from foreign investments, rental payments on property overseas or bank interest if they are not in the UK for no more than 182 days in any tax year. Maybe that is why the couple spend so much time at their Californian beach pad?

This latest tax revelation couldn’t come at a worse time for Sunak whose popularity has been plummeting following his resistance to ditching the National Insurance rise, and then what can only be described as a botched Spring Statement in which he continued the foolish policy of fiddling with energy rebates rather than cut green taxes to help ease the cost of living. 

It also follows on from the criticism that his wife, Murthy, had recently received dividend payments from Infosys, the IT company, founded by her father, one of the world’s richest men, Narayana Murthy, and which was still operating in Moscow.  

What was so embarrassing was that Infosys – no longer run by Murthy – still had its offices open in Russia despite public calls by Sunak for all companies to think “very carefully” about their operations in Russia following President Putin’s invasion of Ukraine. Murthy’s stake may be small – some 0.93 per cent – but it’s worth around £725 million based on recent market valuations and dividend payments may have been around £11.6 million in the past year. Being non-dom may have saved her several millions of pounds a year in tax.

The disclosure was accompanied by a spread of photos throughout the media of Narayana Murthy meeting Putin on several occasions over the last few years. And it was only after the dividend payments came into the public spotlight that Infosys pulled out of Moscow.

Why does any of this matter? Murthy has the right to own stakes in companies set up by her father, and every right to organise her tax affairs in the most efficient way possible. 

The Sunaks, who met at Stanford University, are clearly a wealthy couple in their own right: they have four properties that we know about, including a stunning £5.5 million house on Ocean Avenue in Santa Monica, California and a beautiful 12-acre estate outside Richmond in his constituency. 

They also appear to be generous with their wealth. Earlier this week it came to light that the couple have given more than £100,000 to Winchester College where the young Chancellor went to school. Although his parents were able to afford the fees, one of the many interesting back stories to Sunak’s astonishing political rise is that he worked in a local Indian restaurant to earn extra pocket money. 

It’s been part of the narrative that he has enjoyed telling, coming into use when served drinks himself in a restaurant after launching Dishy Rishi’s Eat Out to Help Out campaign to boost hospitality trade in between the lockdowns. And that’s a good thing: working hard, aspiration and ambition get their reward, a “pull yourself up by your bootstraps” approach central to conservative philosophy. 

As far as we know Murthy’s family wealth has been earned above board, and the tax affairs of the couple are completely kosher. But there is a problem with having too much of a good thing. 

The problem is that the British generally are uncomfortable with big money, and they are even more uncomfortable with politicians having big money – or trying to find ways of making big money on the side. 

It’s not that wealth separates the politicians from the voters; anybody smart should be able to have the sensitivity to understand the plight of those less fortunate or different. 

David Cameron always managed to be simpatico with everyone despite having oodles of money from his father’s days in the City, but did so with an easy charm. In contrast, George Osborne, heir to wallpaper millions, did not manage to glide so easily through the classes which is why his constant reference to “hard-working families” and “we are all in this together” pleas were ignored or laughed off. 

It’s also nonsense that if politicians are too rich they don’t know what the price of a pint of milk or loaf of bread. I doubt many of them do these days as you need to be a whizz as the price varies so much from corner shop to Aldi.

No, the scepticism is much deeper than the price of essentials: voters are rightfully suspicious that most great wealth is earned by either cutting corners and using sharp-practice, or both.

The sheer scale of the Murthy wealth is the other problem. In a brilliant article for the Times this week, Clare Foges (a former No 10 speech writer), wrote: “I don’t think that the British public would be allergic to a plain old millionaire prime minister. Someone in the 1 per cent or even the 0.1 per cent would be fine, but by my calculations Sunak’s family fortune puts him in at least the 0.001 per cent, and this is probably too far from the people he would lead.”

Foges hits the nail on the head, and she wrote that Sunak was probably too wealthy to be PM before the story about Murthy’s non-dom status emerged. We don’t mind a bit of money – preferably old – but too much doesn’t pass the smell test. 

For perception is everything. Rightly or wrongly, the perception of Sunak – himself pretty wealthy – will now be tainted by his wife’s tax status and her great wealth. It’s true that her innuendo about her family’s riches have followed him since he became an MP. Some of the naughtier gossip suggested that one of the reasons he was enjoying such a meteoric rise was that his father-in-law had donated big money to the Conservative Party. That has never been established, and may have been whispered out of spite.

More pertinently now for Sunak professionally, is how voters will interpret his more recent decisions to not increase Universal Credit, to go ahead with the PM’s National Insurance rise, to freeze tax thresholds and to raise corporation tax at such a fragile time. Will they say, “well it’s OK for him; one rule for him, and another for us”? 

Sunak must be regretting not having joined rebel Cabinet ministers last autumn when they were objecting to the PM’s proposal to put up NI to fund the NHS. He should have resigned then. 

Now he’s blown his chances. Rather than having been the has-been hot favourite to succeed Boris Johnson, he could be the principled, tax-trimming back-bencher leading a reforming force within government.