Once again Mr Brown and his Chancellor do too little, too late

With the British economy weakening, the stock market in turmoil, house prices tanking and Northern Rock’s botched rescue still a daily humiliation, Prime Minister Gordon Brown should be doing all in his power to help the City of London weather the gathering storm.

With the British economy weakening, the stock market in turmoil, house prices tanking and Northern Rock’s botched rescue still a daily humiliation, Prime Minister Gordon Brown should be doing all in his power to help the City of London weather the gathering storm. A tax cut, US-style, perhaps; or a moratorium on new red tape. Instead, the best he could come up with on Tuesday was a partial U-turn on his planned crackdown on some of the wealthiest and most successful City financiers, the so-called non-domiciled residents, or “non-doms”.

As so often with Mr Brown and his hapless Chancellor, Alistair Darling, it was a case of too little, too late: most of the assault on non-doms will go on as planned, but some elements have now been adulterated, after a huge outcry from senior City figures. Those commentators, including the Confederation of British Industry, who rejoiced this week, were being too optimistic: a slightly less bad policy remains a bad one.

Britain’s erstwhile reputation as a stable place for international business and high net wealth individuals to use as their base, governed by rules that don’t constantly change and fair tax legislation, is already in tatters. The Labour government’s long struggle to be seen as pro-market and pro-City has ended in ignominious failure; this would remain the case even if Mr Brown were finally to do the right thing and sack Mr Darling.

The bulk of Mr Brown’s tax hikes on business are still due to go ahead in April. The central component of his reckless plan to crack down on Britain’s 114,000 non-doms remains unchanged. The Treasury’s admission that 3,000 non-dom expats will leave Britain in April, when the changes, including a £30,000 annual poll tax, are due to kick in, remains valid; it was always based on a more modest version of the plan than the one that eventually transpired. The only thing that has changed this week is that proposed disclosure requirements and an ultra-damaging attack on overseas trusts have been scrapped – for the time being.

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