Politicians should not set budgets.

Last week, I spoke with Damien Jefferies, CEO of Fine & Country. (You can hear Damien on Episode 43 of Caroline’s Club podcast series ‘How to Keep Your Money’). He said that estate agents selling high-end estate properties in London who rely on overseas buyers, like him had seen new instructions fall off the cliff since Jeremy Hunt’s budget.

Damien asked me what Jeremy had said in his Budget to have caused such a negative reaction.

Last week, I wrote an upbeat piece on the hidden opportunities for UK doms who have been non-UK tax resident to come to the UK without paying income tax on their foreign income and gains for the first four years regardless of whether they bring it into the UK or not. This is a benefit. But I really could not see any significant changes he had made to affect a foreign buyer investing in a home in the UK.

So why have foreign buyers the jitters?

True, there was some vague talk about changing the inheritance tax laws so that they would move away from the concept of domicile to be replaced by a tax based on residence. But this would not affect UK situs homes, which would either be fully taxed if owned personally or become subject to the Annual Tax on Enveloped Dwellings if owned by an offshore company.

I cannot see that much will change for foreign buyers by the year’s budget. But then I am a Fellow of the Chartered Institute of Taxation - foreign buyers looking to invest in the UK are not.

The average foreign buyer may not know the details or the implications of the changes. But they do know how they feel.

They know that Stamp Duty on homes bought in London by non-UK tax residents is 4% higher than for foreigners living in the UK. A home bought for £10,000,000 will attract stamp duty at 17%, a staggering £1,700,000. They know that VAT refunds on goods bought by visitors (the tourist tax) have been removed. This was a nice benefit, which will not raise much tax, but feels like a slap in the face for our foreign visitors. Now we hear that the benefits of non dom status are to be abolished - and abolished by the Conservative Party.

Wealthy foreign families feel unwelcome. They are mobile they can go somewhere where they and their spending power, are appreciated.

Several years ago, I was invited to speak on BBC breakfast show about foreigners living in the UK. I made the case that tax incentives play an important part in where a foreigner lives. I was shocked at how many people in the audience held the complacent belief that London is so swinging and cool that people will come here despite the dwindling tax incentives.

London is still an attractive place for foreigners to live. It has a great culture, cuisine and safety record, but increasingly they are made to feel unwelcome either as a visitor to spend or as somewhere to live. There are other European countries, with considerably better weather looking to attract the wealthy to their shores - such as Italy to spend there.

These changes to ‘soak the rich’ are politically motivated. They raise scant revenue and damage our economy. If foreigners do not buy in the UK the revenue to shops and services which serve this community will fall. There will come a point when we will all be worse off.

Not only did Jeremy Hunt give foreign buyers the jitters he did not address one of the fundamental issues of our economic stagnation. There are 9.3 million people of working age (22% of the total number - one in 5) who are not working. Benefits should be frozen for the 5.6 million who have not worked for over a year, but to do so would damage their chances of being re-elected later this year.

But it is not just the number out of work who need an incentive to work, but those in work who are still working from home on both Mondays and Fridays. Damien said that the drive to work, which normally takes him one hour, takes only 10 minutes on a Friday or Monday. Furthermore the city streets and the lunch bars are empty on those days.

Budgets should be to ‘enhance, through spending and taxation, the productive potential of the economy. This increases the trend rate of economic growth, thereby making people better off and raising extra revenue for the government, which in turn finances lower taxes and /or higher spending’ says Max King, and he is right. Politicians should not be allowed to set badly thought through changes to our tax system with the primary aim of keeping their seats in the House of Commons.