London, March 9: Lord Swraj Paul disclosed today that he had been told by Scotland Yard that the police were no longer investigating his expenses claims.

The Labour peer, who was born in Jalhandhar on February 18, 1931, but has been settled in London since 1966 when he first came to seek medical treatment for his terminally ill daughter, Ambika, also said he is to give up his non-domicile tax status.

It is perfectly legal for foreign-born businessmen to choose to be non-domiciled for tax purposes even if, like Paul, they are permanently settled in the UK.

As non-domiciles, such businessmen are required to pay tax on everything they earn in UK. However, foreign earnings are exempt from tax unless dividends are repatriated to the UK when such funds once again become liable to tax. Foreign businessmen are subject to the tax regimes of overseas territories on their earnings abroad.

Giving tax advantages to foreign business has long been a recognised way of attracting overseas investors to set up in the UK.

The bigger row is not about Paul but about Lord Ashcroft, a deputy chairman of the Conservative Party who has donated more than Pound4m to the Tories. Ashcroft has become the target for Labour attacks because he has admitted that he has been a non-domicile for tax purposes.

The Tory leader, David Cameron, has sought to deflect attention from Ashcroft by pointing out that Paul, who has supported the Labour party financially, has also been a non-domicile.

Paul, the chairman of the Caparo steel empire, has hit back by emphasising that unlike Ashcroft, he had always been open about his non-domicile tax status.

Labour is in the process of piloting a new law through the Commons which will make it compulsory for all peers to give up their non-domicile status. Cameron has said he supports this legislation.

“On the issue of the taxation position of peers, of course it goes without saying that I will be fully complying with the change in the law which the government is bringing forward,” Paul said in a statement today.

He added: “I strongly support the government’s proposals in relation to the taxation status of peers and MPs and the membership of the House of Lords, and the House of Commons.”

The consequence is that if Paul earns money from Caparo’s operations in India or the US, he will have to pay UK tax on such dividends which he previously did not have to do.

Paul, the first Indian to be appointed a deputy speaker in the Lords, stood down from the post and invited an inquiry after a series of Sunday newspaper stories last year questioning his expenses claims. Apart from an inquiry instituted by the Lords, the police started their own investigation, it was said.

The latter has now been dropped, Paul said today. “Following media allegations, the Metropolitan Police Service has been carrying out an investigation into my House of Lords expenses as part of its wider inquiries into this issue. I am delighted to be able to announce today that the Metropolitan Police Service has informed me that it has decided that after due consideration, 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’s decision.”

The controversy surrounding Ashcroft and, to a lesser extent, Paul is being fuelled by the imminence of the general election, which will most probably be held on May 6.

The Tory lead over Labour has been steadily declining with some polls suggesting that Cameron may not win an absolute majority in the Commons.

Paul is a close ally of Gordon Brown who may now feel his chances of remaining prime minister after the election are not as hopeless as they were even a few months ago.

As Harold Wilson once summed up: “A week is a long time in politics.”