Labour’s economic tone is masterclass in law of unintended consequences

Labour’s continual pessimism about the state of the UK economy is likely to be more damaging than the £22 billion deficit they inherited, warns Nigel Green

 
The stark warning from deVere Group’s CEO comes after the downbeat Labour Party conference in Liverpool, which focused on the ‘gap’ in the public finances, and ahead of the first true test of the new government: the Budget on 30 October.

He says: “With the looming spectre of ‘hard decisions’ and fears of brutal tax reforms in the upcoming Budget, the messaging from the new government is not just grim—it’s threatening to drive away the very people and businesses that are crucial to economic growth.

“High-net-worth (HNW) individuals, job creators, and tax-paying contributors are considering leaving the UK, not out of disloyalty, but out of sheer necessity.

“And this is before Labour has even formally introduced its much-feared tax hikes.

“Talk of increasing National Insurance contributions—in essence a jobs tax —capital gains tax, inheritance tax, higher fuel duties, and potential raids on pension savings is sending shockwaves through both the domestic and international business community.

“Instead of instilling confidence and fostering a positive outlook on the future of the UK economy, Labour’s messaging has achieved the opposite.

“Their relentless focus on what they call an economic black hole has undermined faith in the UK’s prospects, leaving investors wary and businesses feeling cornered.”

National Insurance is already a contentious issue, and Labour’s proposed hikes are raising alarms across industries. Increasing contributions from employers is effectively a ‘jobs tax’ and, as such, risks undermining job creation at a critical time.

Businesses are not just numbers on a balance sheet. “They represent livelihoods for millions of people, and each job cut due to this policy will have a ripple effect across the economy,” stresses the deVere CEO.

“Higher National Insurance contributions also discourage foreign firms from setting up operations in the UK, as the cost of doing business here becomes increasingly uncompetitive compared to other countries.”

Higher Capital Gains and Inheritance Taxes

Labour’s plan to increase capital gains tax and inheritance tax may appeal to their base, but in practice, these moves are regressive.

Nigel Green says: “Investors, both large and small, are crucial to the health of the UK economy. By raising capital gains tax, Labour is discouraging investment in UK businesses, property, and new ventures. Why would investors choose to place their capital in a country where they’re penalized for growth, when other markets are more welcoming?

“Likewise, raising inheritance tax is a surefire way to drive HNW individuals out of the country. These are people who contribute significantly to the UK economy, not just through taxes but through charitable giving, investments, and job creation. The prospect of leaving a larger share of their estate to the government rather than their family is enough to prompt many to relocate to more tax-friendly jurisdictions.

“The result? A brain drain of talent and wealth that could have been used to drive UK growth.”
 

Talk of Fuel Duty hikes and pension raids is tone-deaf

 
The UK is already one of the most heavily taxed countries in Europe when it comes to fuel, and talk of increasing fuel duties is an especially tone-deaf policy in the current climate.

“Businesses across the country rely on transportation and logistics, and higher fuel costs will only exacerbate inflationary pressures. This will not only hurt businesses but will also drive up prices for consumers, further straining household budgets.”
 

Then there’s the possibility of Labour raiding pension savings

 
“Pensions are the bedrock of financial security for millions of Britons, and any attempt to raid these funds would be deeply unpopular and economically damaging. Pensions represent long-term investments in the economy, and tampering with them for short-term gain is the definition of short-sighted policy-making,” affirms Nigel Green.

He continues: “Labour’s current strategy seems to be following a playbook of punitive taxes and doom-laden messaging, without a clear understanding of the unintended consequences.

“By talking down the UK economy and scaring businesses and individuals with the prospect of tax hikes and regulatory burdens, they are inadvertently creating the very conditions they claim to want to avoid.

“Instead of inspiring confidence, they’re creating a climate of fear and uncertainty. The message that comes through is one of pessimism, where the only way forward is through sacrifice and belt-tightening, rather than growth and opportunity.

“Labour seems to believe that a tidal wave of new business regulations and tax hikes will somehow grow the economy. But that logic is flawed.

“Growth comes from innovation, entrepreneurship, and investment—none of which can thrive in a hostile environment. Businesses need stability and predictability, not the threat of higher taxes and more red tape.

“The law of unintended consequences is at play here, and unless Labour course-corrects soon, they may find themselves presiding over an exodus of talent, wealth, and investment—leaving the UK’s economic future far darker than it needed to be,” concludes the deVere Group chief executive.