Rachel Reeves changed the government’s position on non-doms weeks after one of the world’s most powerful financiers asked her personally not to increase the tax burden on the super rich.
Documents released to openDemocracy under the Freedom of Information Act reveal Stephen Schwarzman, the CEO of leading asset manager Blackstone, raised “concerns” with Reeves about her plans to reform the tax treatment of non-domiciled individuals at a meeting in Downing Street in December.
The chancellor had previously used the autumn Budget in late October to re-commit to Labour’s manifesto promise to abolish the non-dom tax regime, which allows wealthy individuals who live in the UK to be domiciled elsewhere for tax purposes.
But around a month after meeting with Schwarzman, Reeves watered down this commitment.
Speaking at World Economic Forum in Davos in January, she announced that she had been “listening to the concerns of the non-dom community” and would soften the government’s plans.
The government blocked a request from openDemocracy for details of the discussion between Reeves and Schwarzman, as well as other meetings between senior ministers and major financial institutions, including BlackRock and JP Morgan, but has released a heavily redacted follow-up letter.
openDemocracy approached both the Treasury and Blackstone for comment, but neither had responded at the time of publication.
Reeves’ heavily redacted letter
Schwarzman and a senior lobbyist from Blackstone met with the chancellor and her top advisers on 5 December, as part of a series of meetings between the government and the finance sector.
The Treasury told openDemocracy that the meeting’s purpose was “to gather perspectives on the UK as an investment destination and how to strengthen the UK’s position as a world leading investment management hub”.
While the government has so far rejected openDemocracy’s Freedom of Information requests about what was discussed at the meeting, it did release a heavily redacted follow-up letter that Reeves sent to Schwarzman a week later.
Despite the redactions, the letter shows that the tax treatment of high-net worth individuals was a major topic of discussion between the pair.
“Dear Stephen,” the chancellor wrote, “It was my pleasure to meet with you last week. Thank you for your time and the ideas you shared on how I and the government may seek to achieve our ambitions for growth across the UK.”
A section titled “the tax regime for non-domiciled individuals” reveals that Schwarzman “mentioned concerns” about non-dom tax treatment and inheritance tax.
“You noted the significant contribution that non-domiciled individuals make to the UK and mentioned concerns around non-domiciled individuals leaving in response to the reforms announced at the Budget,” Reeves wrote.
“I want to reassure you that I do value the contribution that non-domiciled individuals make to the economy and want to encourage them to spend and invest more of their money in the UK.”
Reeves also used the letter to highlight that some non-doms will be able to “take advantage of a three-year Temporary Repatriation Facility”, a scheme created by the Conservative government that enables former non-doms to bring foreign income and gains into the UK at a discounted tax rate for the first three years.
Reeves also sought to assuage Schwarzman’s apparent concerns about the UK’s inheritance tax (IHT).
“New arrivals to the UK will benefit from 100% UK tax relief on their [foreign income and gains],” she wrote, “provided they have been non-UK tax resident for the previous 10 years.”
The majority of Reeves’ letter to Schwarzman was redacted, raising questions about what else the giant asset manager lobbied for during the meeting.
A Labour MP, who spoke to openDemocracy on condition of anonymity, said: “The chancellor needs to come clean about why she reversed the policy on non-doms. She was lobbied by Blackstone then the policy was quickly dropped.
“She had no similar response to pensioners or Waspi women when she decided not to fulfill their needs. Who's side is she on?"
The government has also refused to release any records from a number of other meetings with leading financial institutions in response to a series of Freedom of Information requests by openDemocracy.
‘Listening to the non-dom community’
The previous Conservative government announced plans to phase out the non-dom system, which allows wealthy people who live in the UK but are domiciled elsewhere for tax purposes to only pay tax on money they earn in the UK, rather than on all their earnings.
Unveiling the plans in last year’s Spring budget, Tory chancellor Jeremy Hunt said there would be a two-year transition period in which existing non-doms would pay a reduced rate on their overseas income.
The following month, Labour went one step further, with Reeves promising that if elected the party would raise £2.6bn by closing “loopholes” in the plans to abolish non-dom exemptions.
The new chancellor repeated this pledge at the Autumn budget in late October. She said the non-dom tax regime would be replaced with “a new residence-based scheme with internationally competitive arrangements” and the transition period upped from two to three years.
Weeks after the Blackstone meeting, Reeves attended the gathering of the World Economic Forum in Davos, where she sought to reassure the international business community that the UK is an attractive place to invest.
She announced that the government would alter the policy, in effect allowing current non-doms to pay the reduced rate of tax on more of their earnings throughout the already-extended transition period.
“We have been listening to the concerns that have been raised by the non-dom community,” she said.
Many organisations and individuals have lobbied the government about the policy, including a group formed specifically to oppose the plans, the Foreign Investors for Britain, which has reportedly been in regular contact with No 10’s business adviser, Varun Chandra.
But an intervention from Schwarzman would carry considerable weight.
Schwarzman’s firm, Blackstone, is the largest asset manager in the world, controlling more than $1trn in assets globally. As CEO, Schwarzman’s personal remuneration package for last year was worth over $1bn, and a Forbes estimate in November 2024 put his net worth at around $53bn.
Schwarzman is a Republican donor who worked with the first Trump administration and backed the president’s re-election campaign in 2020. He said he would not support Trump at the 2024 election, calling on the party to “turn to a new generation of leaders”, but later U-turned on this to endorse the now-president.
Blackstone is believed to be the largest commercial landlord in history, holding huge swathes of residential real estate. In 2019, the UN’s special rapporteur on housing said in an open letter that the firm was “having deleterious effects on the right to housing” and accused it of “using its significant resources and political leverage to undermine domestic laws and policies that would in fact improve access to adequate housing consistent with international human rights law.” The firm disputed the contents of the special rapporteurs’ letter.
