A proposed wealth tax under a new Labour leader could lead to an exodus of up to £100 billion from the United Kingdom, potentially harming economic growth, investment, and employment, according to asset manager Rathbones. The firm stated that a further tax increase on wealth and property under a new Prime Minister and Chancellor "would be economically damaging to the UK."
Concerns have been raised that a shift towards more left-leaning policies, particularly if Andy Burnham were to succeed Keir Starmer as leader, could significantly increase the tax burden. Current Chancellor Rachel Reeves has already implemented tax hikes totaling £75 billion since taking office less than two years ago, bringing the overall tax burden to its highest point since the end of World War II.
Mohit Kumar, an economist at Jefferies, expressed apprehension that "Burnham policies are left leaning and if the new Chancellor is not credible, it would raise concerns over deficits and borrowing." While Burnham has indicated respect for fiscal rules, the source of funding for any additional spending remains unclear, and Kumar noted that "Taxes have reached a stage where further rise in taxes would be counterproductive."
Analysis by Rathbones specifically highlights the potential impact of a wealth tax. Charlotte Kennedy, a financial planner at the firm, stated, "A particular concern among many people we speak to is that a new Labour government could look to lean more heavily on taxes on wealth, property and capital." She added, "Our analysis suggests that as much as £100 billion of wealth could either leave the UK or be redirected into less productive assets from a tax perspective if a levy on the wealthy were introduced." Kennedy also noted that "highly paid professionals" are considering relocating to jurisdictions with more favorable tax regimes, and for some, a wealth tax could serve as a decisive factor in their decision to move.