Former Chancellor Kwasi Kwarteng has predicted that Sir Keir Starmer's Government will implement a wealth tax before the end of this parliamentary term.
Speaking to GB News, Kwarteng cautioned that Britain faces an economic "doom loop" of escalating taxation, reduced growth, and an exodus of affluent individuals from the country.
"The problem I have with this is it looks like death by a thousand cuts, because essentially we're going into the doom loop that she, Rachel Reeves talked about," Kwarteng stated.
GB News
|Kwasi Kwarteng has warned Rachel Reeves of a 'doom loop' of tax rises ahead of the Autumn Budget
He expressed particular alarm about the recent employer national insurance rise and its detrimental effects on the economy.
Kwarteng outlined how this cycle operates, explaining that tax increases discourage economic activity and reduce growth rates. When growth declines, the Government requires additional revenue to fund public services, necessitating further tax rises.
"[This is] where you're raising taxes, from my point of view, you're disincentivising the economy, you're slowing growth. And when growth slows, you're going to have to raise taxes even more to pay for the public services," he explained.
Kwarteng warned that implementing a wealth tax would prove catastrophic, as it would prompt high earners and major taxpayers to relocate abroad.
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"The Chancellor herself realises that you're going to drive out wealthy people, people who pay large amounts of tax," he said.
He highlighted how modern technology and remote working have made relocation far simpler than in previous decades. Unlike the 1970s when wealthy individuals were predominantly British and firmly established in the country, today's affluent can easily establish operations elsewhere.
"You can set your business up, you can set your home anywhere, and still do business activity," Kwarteng noted, describing a potential wealth tax as "an Exocet missile" to Britain's wealth-generating capacity.
The former Chancellor pointed to the employer national insurance increase as evidence of the Government's misguided approach.
GB News
|Kwarteng told GB News that Labour will implement a wealth tax 'by the end of Parliament'
"Many of us said at the time, last year, when she put up national insurance on employers, that this would be a massive dissent disincentive for business," he stated.
He warned that businesses would reduce hiring, freeze wage increases and make redundancies - predictions now being validated by economic data.
"People wouldn't be hired, wages wouldn't be increased, people would be let go. And all the economic data suggests that that's what's happening and we're only really at the beginning," Kwarteng said.
With approximately four years remaining until the next election, he fears the situation will deteriorate further.