Rishi Sunak goes into the weekend facing questions from the media, Labour and some Tories over the tax status of his wife Akshata Murthy. On Wednesday night, the Independent reported that Murthy has non-dom status, meaning she does not have to pay UK tax on income earned abroad. Her spokesperson has confirmed that she pays £30,000 a year to retain that status having suggested that it was assigned to her as she did not want to give up her Indian citizenship.
Yet two days on and the story is not going away – if anything, it's getting worse for the Chancellor. While no one disputes that Murthy’s tax arrangements are legal, tax experts dispute the idea that her Indian citizenship forces her to hold non-dom status – instead it’s a choice by Murthy to not pay UK tax on her foreign earnings.
The line from Sunak remains that Murthy does not have much choice at all – he has given an interview to the Sun saying it wouldn’t be ‘fair or reasonable’ to ask her to give up her Indian citizenship:
“'What it comes down to is, my wife was born in India, raised in India. Her family home is in India, she obviously has a very close connection. She has investments and a career independent of me. She had this well before we met, before she moved to this country. It wouldn’t be reasonable or fair to ask her to sever ties with her country because she happens to be married to me. She loves her country. Like I love mine, I would never dream of giving up my British citizenship. And I imagine most people wouldn’t.’
However, the fact there is even a story about a tax-raising Chancellor’s wife not paying some tax in the UK is making Tory colleagues twitchy. Labour have gone on the attack – sending emails using the sender ‘Tory Activity Alert’ about the ‘hypocrisy’ of Rishi Sunak on tax. So far, cabinet ministers have been defending Sunak publicly and the Prime Minister has suggested spouses ought to be kept out of the limelight where possible. It won't help relations between No. 10 and No. 11, however, that ‘allies’ of Sunak are quoted as blaming No. 10 for ‘smears’.
So, what are Sunak’s options? It's become clear in recent weeks that he takes great issue with stories about his family – most politicians do. In an interview with the BBC’s Laura Kuenssberg, he compared himself to the actor Will Smith – joking that at least he hadn't hit someone over the criticism of his wife.
While it may be admirable to support one’s family, it can also create a blindspot. It’s also the case that his family wealth can now be weaponised in a way the opposition struggled to do last year. The cost of living crisis means that issues can be found in things that were previously overlooked.
Questions about the tax affairs of someone living in Downing Street need to be treated seriously and transparently rather than dismissed as smears. His wife could choose to pay UK tax on her earnings abroad – as well as tax on those earnings in the relevant countries. Of course, paying more tax than you need to isn’t an option many people would naturally choose. But right now Sunak is in trouble and facing a story that has the potential to snowball – particularly if more disclosures come out about his wife’s financial affairs. It's hard to see the current messaging lasting the weekend.