Britain caught in a 'debt doom loop,' top hedge fund boss warns
But he said the Government's efforts to raise funds by hiking taxes would drive away wealthy taxpayers – leading to a downward spiral for the economy. It comes as Rachel Reeves prepares to further increase levies and slash spending in October to avoid breaking her fiscal rules.
Analysts have warned that the Chancellor is facing a black hole of up to £30 billion in the Autumn Budget. The UK's national debt stands at £2.9 trillion – and is expected to hit £3 trillion either this financial year or next.
'The debt doom loop is affecting capital flows. So the necessity for creating taxations that then drive people away,' Mr Dalio, 75, said on The Master Investor podcast. 'As the financial problems and the social problems worsen, having the effect of causing people with money to leave.
He added: 'So you have this financial deterioration, that precedes social and economic deterioration that has caused migrations all around the world and so on. 'And there is only one way to deal with that. Both of our countries need a strong leadership of a strong middle.
'They have to have the war between those of the left and those of the right begin to end because difficult choices are going to have to be made, you know, like our countries had in World War II.'
It comes after the International Monetary Fund (IMF) last week cautioned that Ms Reeves faces having to take drastic action on spending unless she abandons her pledge not to hike taxes on working people.
Mr Dalio's comments echoed a warning from the head of the UK spending watchdog who earlier this month said there were 'reasons to worry' about surging debt, but cautioned against 'higher and higher taxes'.
Richard Hughes, chairman of the Office for Budget Responsibility (OBR), told MPs that successive chancellors had been willing to see the debt pile 'ratcheted up and up over time'.
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