Labour’s non-dom raid may reduce tax revenues rather than increase them, Treasury officials fear.

Sir Keir Starmer‘s party planned to use the money raised from wealthy individuals whose permanent home is outside the UK for tax purposes to invest in public services.

But the Guardian reported that Treasury officials believe estimates due to be released by the government’s spending watchdog could show the policy will not bring in any money because of the impact of non-doms fleeing the UK.

The Office for Budget Responsibility (OBR) originally forecast that scrapping the tax status could raise about £3.2 billion a year.

However it admitted this was uncertain because it was difficult to predict how non-doms would react to the clampdown and if they would find ways to avoid it or leave Britain altogether.

Shimeon Lee, researcher at the TaxPayers’ Alliance, said: “Taxpayers will be baffled by this blatantly unworkable policy.

“Labour’s crackdown on non-doms will not only cost Britain money, it will discourage wealth creators from coming to the country.

“The government should reconsider this crackdown if they’re serious about encouraging growth and prosperity.”

The Tories last year announced that they would phase out the non-dom tax break.

Labour said they still hoped they could raise an estimated £2.6 billion over the course of a parliament by cracking down on loopholes.

The party later predicted its changes could raise £1 billion in the first year to put towards funding universal school breakfast clubs and more hospital and dental appointments.

Sir Keir’s party may now have a £1 billion hole in its spending plans if the OBR forecast shows the policy will fail to raise money.

However Chancellor Rachel Reeves is expected to plough on with the move at next month’s budget.

The Prime Minister has warned the autumn budget will be “painful”, with tax hikes widely expected.

The new Government has faced an intense backlash over plans to strip millions of pensioners of winter fuel payments.