Labour divided: Ed Balls says Miliband's pledge to end non-dom status will "cost Britain money"

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Does Balls oppose aboloshing non-dom status? (Source: Getty)

Ed Miliband's big vow to end non-dom tax status is in danger of being overshadowed by his shadow chancellor's vocal opposition to the policy - after footage emerged of him saying abolishing the scheme will "probably end up costing Britain money".

Miliband will pledge to scrap the non-dom status, held by around 155,000 people, in a speech in Warwickshire later today. While the policy of targeting wealthy "foreigners" may play well with core Labour voters, it may not go down so well in the Treasury.

Labour's shadow chancellor, Ed Balls, said in January that the current non-doms rule needed to work in a "fair way" - but that abolishing the status entirely could cause some wealthy individuals to leave Britain altogether.

Non-domicile status is granted to British residents who pay tax on their UK income, but their permanent home is abroad so pay no UK tax on their foreign income. Non-doms already pay a £30,000 annual charge for their tax status.

"The next Labour government will abolish the non-dom rule. And we will replace it with a clear principle - anyone permanently resident in the UK will pay tax in the same way," Miliband will say.

Labour has few friends left in the business world, and the days of Tony Blair's "prawn cocktail offensive" to woo the City are long gone. Miliband took a battering last week after more than 100 business leaders warned a Labour government will "threaten jobs and deter investment".

Simon Walker, the director general of the Institute of Directors. made a spirtited defence of non-doms and attacked Labour's economic logic:

Attacking non-doms is a shrewd political move, but the economics of the proposed reforms are unconvincing. It’s very unclear what additional revenue would be raised, but the UK’s international reputation would be put at risk. This country has benefited enormously from attracting some of the most successful businesses and entrepreneurs in the world, with the previous Labour government recognising the benefits of an internationally competitive tax system.

However, another dividing line that places the Conservatives on the side of the wealthy will be welcomed by Labour supporters.

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