It has never been enough for politicians to abide by the law. Voters quite rightly expect much more: for their leaders to uphold standards of integrity and honesty and the spirit of the rules that they expect everyone else to live by. This is why the revelations about the financial affairs of Rishi Sunak and his wife are so damaging, not just to him personally, but to the government in which he serves and the wider political system. Sunak’s wife appears to have reduced her tax liability through tax arrangements that call into question their household’s commitment to paying their fair share into the Treasury coffers that Sunak, as chancellor, is responsible for.
Sunak is believed to be the wealthiest member of parliament. But his own fortune is dwarfed by that of his wife, Akshata Murty, whose stake in her father’s business Infosys is worth around £690m, making her one of the UK’s richest women. Sunak is not only one of the most senior members of the government, he is widely acknowledged to have prime ministerial ambitions. It is therefore reasonable to expect that he and his wife would make meticulous efforts to organise their financial affairs so that their primary tax liability is in the UK, the country in which they and their children live and which Sunak clearly aspires to lead.
The revelations of the last few days are therefore extraordinary in what they reveal, both about Sunak’s lack of political skill and his diminished sense of responsibility to the exchequer. First, we learned that despite living in the UK, Murty is non-domiciled for UK tax purposes, meaning that she pays tax on her global income in India rather than the UK. We do not know whether and how much tax she paid on the £54.4m in dividends she has received from Infosys over the last seven years; whether tax was paid at the lower rate that is applicable in India or whether she may even have used a tax haven to reduce her tax liabilities further. Second, it transpires that Sunak, like his wife, held a US green card during six years as an MP and 18 months as chancellor. This means he was a permanent US resident for tax purposes, legally committed to making “the US your permanent home” while a senior UK minister. It also means Murty had made that commitment to US authorities, yet Sunak’s defence of her non-domiciled status in the UK was that she eventually planned to move to India to care for her parents. Lastly, it has emerged that Sunak has been listed as a beneficiary of tax haven trusts in the British Virgin Islands and the Cayman Islands since becoming chancellor. The British Virgin Islands are the subject of an anti-corruption inquiry set up by the British government, due to report in the coming weeks.
There are substantive issues here about how much Sunak and Murty have saved in terms of their tax liabilities in this way. The exact figure is unknown but could be substantial. Even though Murty has now said she will pay taxes on her global income in the UK, if she remains non-domiciled, she stands to save £280m in inheritance tax under the provisions of a 1956 Anglo-Indian tax treaty. It is completely inappropriate for the chancellor and his wife to use the tax-reducing potential of non-domiciliary status in a way that simply isn’t available to the vast majority of British citizens, many of whom will be paying more tax as a result of Sunak’s spring statement.
Quite aside from the substantive issues, Sunak’s defensive reaction has revealed his own sense of entitlement. He has criticised journalists asking entirely legitimate questions about his wife’s financial interests in Russia, as other companies have pulled out. His political allies have tried to write this off as a “political hit job”. The source of these leaks is irrelevant to the questions they raise. Sunak appears bemused that voters might expect him to go above and beyond the law in terms of his family’s tax affairs.
There are parallels with the other scandals to hit this government: the fact that illegal parties were held in Downing Street attended by Boris Johnson as the public were expected to abide by strict lockdown restrictions that prevented some from saying goodbye to their loved ones. The whiff of financial corruption that hangs over the question of how Johnson funded the renovation of his Downing Street flat. The fact that there have been no consequences for Priti Patel after the independent adviser on the ministerial code found she had broken it by bullying civil service staff. This all contributes to the sense that we are governed by ministers who regard the rules as being for other people, not themselves.
As we saw with the expense scandal more than a decade ago, this damages citizens’ trust in democracy. A new survey on the future of democracy published in the Observer today finds 78% of the public think politicians understand their lives badly and just 6% think their voters’ views are the main influence on government decision-making. Sunak has done much more than weaken his own leadership prospects: he has undermined public faith in politicians more broadly.
