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The world's wealthy have always been a mobile group, but not to this degree. A record 142,000 millionaires will migrate by the end of this calendar year, up from 110,000 in 2019, according to by Henley & Partners. Millionaire migration will rise to 165,000 in 2026, the group forecasts.

Political instability, economic uncertainty and shifting tax regimes are key push factors, while the ease of remote work, availability of golden visas and the appeal of emerging lifestyle hubs are powerful incentives – sales of US$10m+ homes in Dubai 63% to $2.6 billion in Q2 compared to the same period a year earlier, Bloomberg's coverage of 51ÂÒÂ× data revealed this week. 

Despite this trend, successive UK governments – but particularly the current one – have assumed that they can raise significant sums from the small group of very wealthy individuals living in Britain. A combination of the reforms to the non-dom regime made by the previous government in March 2024, then by Labour in October, were supposed to raise an additional £13.1 billion from just 10,000 individuals in the 2027-28 financial year, official estimates suggested at the time. The October 2024 changes to capital gains tax were supposed to raise another £2.5 billion in 2029-30, mostly from the 6,000-odd taxpayers making more than £2 million a year.

That, it turns out, was probably a mistake: "Higher earners’ behavioural responses to tax changes are more uncertain and potentially higher than assumed in costings," the OBR in its Fiscal Risks and Sustainability Report yesterday (p.139). "A growing reliance on this small and mobile group of taxpayers therefore represents a fiscal risk."

Instinctive desires

That is a sizable mea-culpa and whether it's arriving too late will remain uncertain for some time – many high-net-worth individuals are keeping their options open by holding onto their London homes, according to Tom Bill's recent analysis of 51ÂÒÂ× figures. 

Indeed, we may see a climbdown in the months ahead – a June 17th in the FT suggested that Treasury officials are looking at reversing the decision to charge inheritance tax on the global assets of non-doms. But the UK's fiscal position is now that Chancellor Rachel Reeves is under pressure to come back for another bite. Former Labour leader Neil Kinnock this week called for a 2% wealth tax on assets worth more than £10 million. The Treasury didn't endorse the idea, but it added top spin by to rule it out, as it has done previously. 

This dissonance strikes at the heart of the seemingly impossible task of taxing modern Britain. As the FT's Martin Wolf this week, the problem isn't that the British state isn't effective, or that living standards aren't relatively high, because they are – rather "the economy does not provide a rising standard of living or the expected quality of public services at politically acceptable levels of taxation."

Labour is stuck between the instinctive desire to ask the wealthy to bear a larger load with the reality that it will almost certainly cost more than it raises, thereby requiring spending cuts to make up the difference. This isn’t a uniquely British problem – governments worldwide are opting to run increasingly large deficits rather than confront voters with the politically fraught issue of sustainable taxation and public spending.

Fiscal tightening

You have to feel for Reeves – her fiscal inheritance was dire. Labour's plans in part hinged on fanciful OBR predictions of a recovery in UK productivity – see – without which she must preside over a period of enduring austerity or overhaul the fiscal rules, which could prompt a massive reaction in the bond market.

But many economists agree that a lack of public investment is what's caused the long running stagnation in UK productivity; since 1987, the public investment to GDP ratio has averaged 2.5%, compared to a post-2000 OECD average of about 3.7%. The fiscal rules only make this worse, as by economists at the National Institute of Economic and Social Research (NIESR):

"When governments have needed to rein in spending in order to hit a target for the budget deficit or government debt, they have found it easier to postpone or cut investment projects rather than to cut current spending. Voters are less likely to be upset by new motorway construction being put on hold than by cuts to spending on the NHS or schools. As a result, fiscal tightening has always resulted in falls in public investment."

This cycle must eventually be broken, and you get the sense that Reeves has few options left but to take the gamble on overhauling the fiscal rules. That, according to the NIESR report, is the way forward – the report suggests replacing the current fiscal rules with one rule specifying a path for government consumption and a second rule mandating a minimum level of public investment as a proportion of GDP.

"There is a risk that such an announcement could lead to an adverse market response, something that would have to be carefully managed by the government," the authors added.

In other news...

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