Leading industrialist and Labour peer Swraj Paul on Tuesday said he had decided to give up his “non-domicile” status which exempted him from paying British taxes on his overseas businesses.

The decision, announced in an interview to the New Statesman, would increase pressure on the Tories, who have been embroiled in a damaging political row over the tax status of their deputy chairman and key financial backer Michael Ashcroft.

Lord Ashcroft was given peerage in 2000 after he gave a written undertaking that he would give up his “non-dom” status within a year. Yet, it has now emerged that he continues to be a “non-dom” for tax purposes; prompting angry calls for him to be stripped of his peerage. Tory leader David Cameron is under mounting pressure to sack him.

Lord Paul's decision deals a blow to the Tories' argument that several Labour donors, including Lord Paul are also “non-doms”.

Speaking about the Tory bid to drag him into the controversy, Lord Paul said: “I think they have been caught with their pants down and what better than try to reflect on others. First of all, I am a born domicile. I am born in India. He was the only one who was asked to pay full taxes. Nobody asked me. I have always been open about my non-domiciled status. There are lots of non-doms in the House of Lords but I don't know of any case where they were asked to pay full tax, apart from Lord Ashcroft.”

On financial backing

In a reference to Lord Ashcroft's financial backing for the Tories' election campaign, he said: “I am not buying MPs, seats or the party. I have no interest in being a Minister. I'm too old for it anyway. The Tories seem to be confused. And don't forget I was appointed a peer by John Major, not by the Labour government of Tony Blair or Gordon Brown.”

Lord Paul said he fully supported the government proposals in relation to the tax status of peers and MPs.

“Of course it goes without saying that I'll be fully complying with the change of law which the government is bringing forward,” he said commenting on the move to make it compulsory for peers to be fully domiciled in Britain for tax purposes.

Asked how much the decision would cost him in terms of his tax payments, Lord Paul said: “Definitely not millions of pounds, or hundreds of thousands.”

He also clarified the nature of his donation to the Labour party saying: “I have never given a personal donation to the Labour party.”

Privy council

Reacting to criticism of his appointment to the Privy Council last year, he said: “My contribution to this country is perhaps bigger than a lot of people who are privy councillors. I don't think it is a monopoly for ex-Ministers and Ministers to be members of the Privy Council. I bought steel companies in Britain and brought them to health and made the industry fashionable again in the 1980s. We have 3,500 employees in this country right now.”

On the controversy over his parliamentary expenses, Lord Paul said: “I am delighted to announce today that the Metropolitan Police Service have informed me that it has decided after due consideration that it will no longer be proceeding with any investigation or inquiry in relation to my House of Lords expenses. I very much welcome the police decision.”

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