Climbdown claim over 'non-doms' tax

Treasury Chief Secretary Yvette Cooper admitted that there had been "misunderstandings" as a result of the wording of the draft legislation document drawn up by officials.

However she insisted that there had never been any intention to "snoop" on the worldwide earnings of foreigners living in Britain who claimed non-domiciled status - the so called "non-doms".

"There have been some misunderstandings as a result of some the detail of the consultation document - things that were never intended - and we have clarified that," Ms Cooper told BBC Radio 4's PM programme.

"We think there is a series of things in the draft legislation - including around people's worldwide income and the approach that has been taken to that - that are not the clear policy intention of the Government and have never been so, but as a result of the way in which the wording is in the draft consultation document there have been misunderstandings. That is why we are clarifying it."

Under the Government's plans, non-doms would become liable to a flat rate annual levy of £30,000 once they have been resident in the UK for seven years. Ministers are consulting on a higher charge for those who have been there for ten years.

"We don't need to know the detail of people's worldwide income if they are going to be paying the £30,000. Equally we do think that people should be operating on a fair basis if they have been in this country for a long time," Ms Cooper said.

Shadow chancellor George Osborne said that Mr Darling's "climbdown" - after the Conservatives raised the issue in a letter to him - showed that he was not up to the job of running the nation's finances. "In times of economic uncertainty, people need a Chancellor who can demonstrate strength of leadership and consistency of judgment. With Alistair Darling, we have neither," Mr Osborne said.

"In his time at Number 11, he has gone from one retreat to another and his economic incompetence, whether on Northern Rock, capital gains tax or now non-domiciled taxation is doing real damage to the real economy.

"The question for our dithering Prime Minister is how long can he keep someone at the Treasury who is clearly not up to the job."