Labour's potential tax raid on wealthy individuals could backfire, experts warn.
As the party considers targeting high earners to fill a £22billion financial gap, concerns are mounting about the unintended consequences.
Jasmine Birtles, money expert and founder of MoneyMagpie, cautioned that such measures might prompt millionaires to leave the country or opt for early retirement.
Speaking to Andrew Eborn of Octopus TV, she highlighted the risk of wealthy individuals relocating to tax-friendly destinations like Dubai or Switzerland.
Birtles explained that the richest people (one per cent) are paying 30 per cent of tax in the UK but if they leave due to an increase of taxes, there will be massive knock-on effects.
This exodus could potentially leave the UK worse off, despite Labour's intentions to boost public finances.
Experts suggest the state pension should be means tested
GETTYRachel Reeves, Labour's shadow chancellor, faces the daunting task of finding £22bn this financial year to address what she claims is a black hole inherited from the previous Government.
Labour has pledged not to increase taxes on "ordinary working people", ruling out hikes in VAT, income tax, National Insurance Contributions and corporation tax but this leaves wealth taxes on capital gains and inheritance in the spotlight.
However, Birtles questioned the definition of "ordinary working people", stating: "Who counts as ordinary working people? I work and I earn but I don't want to be saddled with a huge tax bill - what am I working for if the Government take half my money?"
She explained the more you get taxed, the more you wonder where the money goes. Birtles expressed concerns about Government spending priorities, citing examples of expenditure she disagreed with, such as war and net zero projects.
The state pension's sustainability has also come under scrutiny. The triple lock mechanism, which ensures state pension increases, is under scrutiny due to its growing financial burden.
Birtles highlighted the significant cost of the state pension, stating: "I agree with pensioners having money but honestly as a nation - and most western countries - we cannot afford the current and future state pension bill. It costs us around £120bn - they put it up around eight percent last year so it's a huge amount of money.
"The population have trusted the Government to manage the public purse in the right way but I haven't trusted them for a few years now and I certainly don't trust them now.
"Why should they punish or over tax the rich because they will go and give money to the public sector - that will be a waste. The more tax you pay, the more you wonder where it is going."
Recent figures also suggest the National Insurance fund used to pay for pensions could be depleted within two decades. Financial services firm Broadstone highlighted the growing imbalance between pension payouts and fund receipts, exacerbated by the UK's ageing population.
Damon Hopkins, head of DC and workplace savings at Broadstone, warned: "While it would be a significant political risk to endanger the triple lock now, its current format could be increasingly challenging for the Treasury to sustain."
Joshua Gerstler, chartered financial planner at The Orchard Practice, added: "I can see the State Pension becoming a means tested benefit in the future. It is more important than ever to be making your own provision for retirement as you cannot rely on the State Pension being around forever."
Labour's proposed non-dom tax raid may not yield the expected revenue, according to Treasury officials.
The Guardian reported that the Office for Budget Responsibility's (OBR) initial forecast of £3.2bn annual revenue from scrapping the non-dom tax status could be revised downwards.
The concern is that wealthy individuals might leave the UK or find ways to avoid the tax, potentially reducing overall tax revenues.
Shimeon Lee from the TaxPayers Alliance criticised the policy, stating: "Taxpayers will be baffled by this blatantly unworkable policy. Labour's crackdown on non-doms will not only cost Britain money, it will discourage wealth creators from coming to the country."
Despite these concerns, Labour maintains hope of raising £2.6b over a parliament through this measure, with £1b projected in the first year to fund various public services.
Given the potential challenges facing Labour's tax plans and the state pension system, experts are urging policymakers to consider the broader implications of their decisions.
As the UK grapples with these complex fiscal issues, there's a growing call for a balanced approach that supports both public services and economic growth.
Policymakers must weigh the potential consequences of targeting wealthy individuals against the need to maintain a robust tax base and sustainable pension system.
