The privacy that Rishi Sunak seeks for his rich wife is not afforded to Britain’s poorest

Britain’s Chancellor of the Exchequer Rishi Sunak has asked the Prime Minister’s independent adviser to look into whether he properly declared his ministerial interests, after a week of headlines about his personal tax arrangements. The fast-rising politician, widely tipped as a future Prime Minister of Britain, must persuade voters there is no double standard in the way he manages his family finances alongside the nation’s.

He needs to demonstrate that he has stayed within the ministerial code, which requires chancellors to ensure that: “No conflict arises, or could reasonably be perceived to arise, between their public duties and their private interests.”

By requesting an independent probe, Sunak signals full confidence that he has done nothing wrong and has nothing to hide. But simply playing by the rules may not be enough to protect his political ambitions. The appearance of a conflict of interest can be hard to avoid since chancellors set the rules for everyone’s tax and those same rules are bound to affect their own finances.

Private matter?

Sunak has condemned the treatment of his wife, Akshata Murty, in the media. He insists that her money is her own affair and that attention to her non-domiciled tax status are “smears” to attack him.

But this contrasts with conditions imposed at the other end of the income scale. Universal credit claimants must keep the Department for Work and Pensions continually informed of their household’s financial circumstances. As couples must claim jointly, entitlements can be cut when a partner moves in or brings more money in, and both partners may be sanctioned for fraud if they receive too much due to unreported household income or savings.

The wealth enjoyed by Sunak and his wife was never a secret. He worked for Goldman Sachs in the United States and networked with Silicon Valley entrepreneurs while studying there, before running his own firm. Murty has amassed her own fortune including a 0.9% stake in Infosys, the Indian IT firm co-founded by her father, valued at over £500 million ($652 million).

High net-worth individuals routinely set up tax-minimising arrangements for themselves and their companies. While legal, these can look awkward when someone enters politics, and their family members are found to pay less tax than constituents on far lower incomes. Sunak’s unusually rapid rise – elected to Parliament in 2015, on the front bench since 2018, Chancellor from February 2020 – means full disclosure of his wealth was only recently required, and details are still emerging.

Most attention has centred on his wife’s use of non-domicile status which minimises her tax liability on Infosys dividends, keeping an estimated £20 million ($26 million) of income that might otherwise have flowed to the Treasury. The claim that she had to be a non-dom to avoid losing Indian citizenship was instantly disputed, and Murty has now said she will pay UK tax on her foreign earnings.

Non-doms typically pay £30,000 per year for the privilege and can live year-round in the UK provided they declare it is not their permanent home. Although Murty did nothing illegal, her conduct contrasted with most of the three million people in England and Wales with family roots and ongoing connections in south Asia, who have no special status and pay UK tax on income earned abroad.

Expectations of fairness

Even if (as expected) Lord Geidt’s enquiry clears the chancellor and his family of any wrongdoing, this efficient personal tax planning will inevitably clash with public perceptions of fairness. This is particularly stark as typical UK households are facing an unprecedented cost of living shock.

Sunak himself promoted “progressive” tax in March’s spring statement, raising thresholds for National Insurance contributions so that more on lower incomes will not have to pay them.

His tax-cutting boast was quickly dented by the calculation that most people with incomes over £25,000 will pay more tax. With national insurance rates raised and income tax thresholds frozen, pay rises will mean higher bills, even though pre-tax income is unchanged or falling in real terms. Charities fear these measures did too little to shield low-income families from this year’s surge in food, fuel and other essential costs.

What’s next?

After being lauded for swift pandemic support, Sunak was already battling to retain his glow as harder times (and fixed penalty notices) arrived after lockdowns.

He has also only recently surrendered a green card, which would have allowed a move back to his US home. The impression that, until recently, he could have opted out of life in the UK if the going got too tough may tarnish his image.

More likely, the chancellor will be cleared of breaking any rules and will defend those rules as part of a business-friendly tax base that benefits everyone.

But at a time when London’s role in hosting Russian oligarchic wealth is under closer examination, while ordinary taxpayers brace for inflation to reach 8% before the summer, Sunak will remain under scrutiny for any personal gains from his low-tax ambition.

Alan Shipman is a Senior Lecturer in Economics at The Open University.

This article first appeared on The Conversation.