Outside View: Take care, Mr Darling: the pips you plan to squeeze are leaving

We're broke, and it's getting worse. Alistair Darling will see to that. Seasoned readers may recall a previous dark time, when a Labour Chancellor had his back to the wall and started lashing out at taxpayers. That was Denis Healey, who faced with chaotic Government finances promised to "squeeze the rich until the pips squeak". The ensuing tax carnage notably failed to make any impact on public finances. People simply walked – the great brain drain of the 1970s. Are we seeing something similar now?

Britain is heading into this recession with the worst situation of any of the seven leading industrialised nations. This essentially is due to the massive gearing up in public expenditure, especially health costs, which accompanied Labour's second term. So what happens next? You guessed it: more taxes.

We face a major reform of the capital gains tax (CGT) regime. In simplifying matters this has also angered small business owners facing an 80 per cent increase in their tax bill on disposing of their businesses.

The abolition of taper relief will seriously affect anyone with long-held assets. Yes, the CGT rate is coming down, but if you have property or shares bought before 1998, you are quite likely to be worse off.

Then consider the abolition of PEPs and accompanying switch into Isas. This gives Mr Darling the chance to snuff out the tax-free nature of PEP cash holdings. The classic "granny trusts" set up to pass gifts on to grandchildren are also getting hit. And then there's the non-dom furore.

The issue of wealthy foreigners living in the UK and paying tax only on their UK income has been bubbling around for years. This is a complex subject with arguments on both sides, but whatever your opinion, it is hard not to be shocked at the massive assault now being launched. It's not just the flat charge of £30,000 per individual that is being raised, but that the new offshore trust proposals are both numerous and difficult to comprehend. Americans are particularly angry as they face double taxation.

Legal opinions differ, but not surprisingly the many thousands of wealthy foreigners who make London their home are up in arms. One study has suggested half may decamp, meaning a massive reduction in revenue to the Exchequer. Sound familiar?

Why is the Government being so short-sighted? One suggestion is that they are responding to the TUC's campaign for higher taxes. Another that they recognise a growing sense of unfairness among UK taxpayers.

But before encouraging too many wealthy people to leave they should take a look at the erosion of the tax base already going on – the statistics on emigration are frightening. These are often lost in all the focus on immigration. But consider this: more than 4.5 million British passport holders now live abroad. In terms of graduates of working age, an astonishing one in six now lives abroad. Emigration has been hovering around 400,000 per annum in recent years. Surveys suggest as many as one in five of us is considering emigration.

The Government must be careful here. It is not possible to continue to raise taxes without a consequent effect on the tax take through emigration. As an exercise it can quickly become self-defeating. The pips are not just squeaking – they are leaving.