Hague on Ashcroft: "This decision will cost him (and benefit the Treasury) tens of millions a year in tax, yet he considers this worthwhile."

When William Hague, then leader of the Tory Party, wrote to Tony Blair to complain that Michael Ashcroft had been refused a life peerage - partly on the grounds that he was a tax exile - he stated:

He is, however, committed to becoming resident by the next financial year in order properly to fulfill his responsibilities in the House of Lords. This decision will cost him (and benefit the Treasury) tens of millions a year in tax yet he considers this worthwhile.

Which only makes his recently revealed non-dom status all the more troubling. According to Hague's letter Ashcroft thought it "worthwhile" to pay "tens of millions" in taxation in order to enter the House of Lords, so his decision to avoid paying UK taxation on much of his income is at odds with what Hague argued in order to obtain him his lifetime peerage.

Furthermore, and you can read the letters by clicking on the link in the first paragraph, it was made very clear that he was being denied a life peerage because of doubts about "his status as a UK taxpayer".

So, it seems unquestionable that Hague understood that Ashcroft's status as a tax exile was one of the main reasons for refusing him a life peerage, and that Hague gave repeated assurances to both Blair and to Lord Thomson, chair of the peerages scrutiny committee, that Ashcroft would end his status as a UK tax exile.

But yet Ashcroft now claims he entered the House of Lords as a "non-dom". How did this come about?

Last night the peer Lord Oakeshott wrote to Gordon Brown and the cabinet secretary, Gus O'Donnell, to demand the immediate release of all documents to substantiate Ashcroft's claims – specifically that the government agreed to downgrade the undertaking he made when he was ennobled to become a UK resident to allow him to retain his non-dom status.

The Cabinet Office, which holds all the documents relating to Ashcroft's ennoblement, confirmed that it agreed with him that an undertaking to become a "permanent resident", under which he would pay full tax, could be replaced with a commitment that he would "live indefinitely and would therefore be a long-term resident", to ensure he lived in the UK and attended the Lords. That change was made in June 2000 – weeks after his conditional nomination was announced.

However, the Cabinet Office would not clarify whether this affected his tax status, or how Ashcroft subsequently used a loophole in the law introduced eight years later which allowed "long-term residents" to remain non-doms.

The problem with this is that it stinks.

Whatever loophole Ashcroft may have subsequently found to slink out of paying UK taxation on all of his earnings, there can be no doubting that everyone understood before the peerage was announced that this was the very matter which made him unsuitable for such an award.

Indeed, Hague understood it enough to promise that giving him a peerage would result in the Treasury being better off by "tens of millions a year" and that Ashcroft thought this "worthwhile".

And yet, despite Hague's assurances, Ashcroft has entered the House of Lords whilst not paying UK taxation on a substantial part of his income.

In other words, he gets to take part in deciding which laws the rest of us will abide by - including laws on taxation - whilst not paying taxation on all of his earnings.

David Cameron has been running scared of this story for years, refusing to comment on Ashcroft's tax status and insisting that this was a matter of privacy between Ashcroft and the Inland Revenue. And he has been doing this whilst Ashcroft was funding his election campaign with especial focus on marginal seats.

Now that Ashcroft's status as a "non-dom" has been revealed, Cameron is insisting that there is nothing further to be discussed and that press interest in this story is simply "flogging a dead horse".

"We're not going to comment any further," a spokesman for the party said. "We're not going to be very helpful, I'm afraid."

I'm not sure that Cameron is going to get away with this. We are talking about avoidance of a tax bill of approximately £127 million over the last ten years. On LBC, even right wing shock jocks like James Whale are saying that they find this appalling.

Cameron can stick his head in the sand and hope that this goes away, but his refusal to discuss it only heightens the impression that he has something to hide.

Cameron is pretending that he doesn't want to discuss this because there is some great principle at the heart of this concerning privacy, but that is an almost painfully weak argument.

He is avoiding this, in truth, because it is embarrassing to him.

William Hague's letters, and the assurances he gave in them, are not going to simply go away, no matter how much Cameron wishes this.

The cabinet minister Ed Balls said Labour regarded the issue as a question of "the integrity of our politics" and would not let it rest. "This has actually moved into a real judgment issue about both William Hague and David Cameron. David Cameron wants to be prime minister, he's got to answer the questions. What did he know and William Hague know and when did they know that Lord Ashcroft was not paying tax and using foreign money to pay for Conservative electioneering?

Those are valid questions, and Cameron needs to answer them. Has Ashcroft been using foreign money to influence the UK election? That's not a matter of privacy, that's a matter of electoral process. And Cameron can't be allowed to duck it.

Click here for full article.

Tags: Lord Ashcroft, tax, taxation, non-dom status, David Cameron, Tories, UK election 2010