Labour’s tax hikes plot: Rayner ‘secretly pushes for’ fresh raids on pensions, inheritance, shares, banks and the wealthy – as dozens of MPs call for benefits cuts U-turn
A Labour plot to impose more eye-watering tax hikes was exposed today – with pensions, inheritance, shares and high earners in the firing line.
Leaked proposals from Deputy PM Angela Rayner reveal she has been pushing to increase the burden on Brits further instead of trimming spending and benefits.
The memo – sent to Rachel Reeves before the Spring Statement – suggested eight different tax rises that would raise billions of pounds in revenue.
Although the Chancellor ignored the lobbying at that stage, she is struggling to find a way of balancing the books as the economy stalls ahead of the Spending Review and Autumn Budget.
The details, first obtained by the Telegraph, suggest serious tensions at the heart of the government over its approach – although insiders argued that such papers can be drawn up without ministerial sign-off.
Keir Starmer is facing a massive revolt from Labour MPs over plans to curb benefits. Ms Reeves has also been hinting she is looking for a way to water down brutal cuts to winter fuel allowance, which is seen as having inflicted massive political damage.
Backbencher Neil Duncan-Jordan renewed calls for a pause on reductions to welfare this morning. ‘We need to make sure that MPs are not voting to make people poorer before they have all the information,’ he told BBC Radio 4’s Today programme.
The measures floated by Ms Rayner included reinstating the pensions lifetime allowance, changes to dividend taxes, a raid on a million people who pay additional rate income tax and a higher corporation tax level for banks.
Leaked proposals from Deputy PM Angela Rayner reveal she has been pushing to increase the burden on Brits instead of trimming spending and benefits
Rachel Reeves (pictured with Keir Starmer yesterday) is struggling to find a way of balancing the books as the economy stalls ahead of the Spending Review and Autumn Budget
Public sector borrowing has been running far above forecasts
They would raise taxes by between £3billion and £4billion a year, according to estimates in the document submitted to No11 in mid-March.
However, the true figure is likely to be higher as not all the ideas were costed.
Allies of Ms Rayner said she has become exasperated with having to defend spending cuts.
A source close to the Deputy PM declined to comment on the memo. But insiders said it was not unusual for discussion papers to be commissioned at official level without ministerial sign-off.
It was titled ‘alternative proposals for raising revenue’ and stated the policies ‘would be popular, prudent and would not raise taxes on working people’.
Mooted tweaks included reinstating the pensions lifetime allowance – a £1million cap on how much could be saved in a pension without incurring higher tax charges.
Ms Rayner’s memo also suggested freezing the threshold at which the additional rate of income tax kicks in. It is fixed at £125,140 until April 2028, but she recommended continuing the freeze – dragging more people into the top tax band over time.
The document also proposed ending inheritance tax relief on shares in firms on the Alternative Investment Market.
In the end the centrepiece of the Spring Statement was a crackdown on welfare to stop the bill spiralling out of control.
Ms Reeves has been hinting she is considering the threshold at which winter fuel allowance is removed after the cut was seen as a factor in dire local election results.
She stripped nine million pensioners of the payments – worth up to £300 – soon after Labour came to power. Only those on pension credit are still entitled.
But Sir Keir is facing the threat of a revolt over that policy, as well as curbs to working age benefits.
There is speculation that the leadership is looking for a way out, potentially by scaling back the cuts.
The behind-the-scenes wrangling was revealed as new figures underlined the scale of the problems facing the government.
UK inflation was up from 2.6 per cent in March to 3.5 per cent in so-called ‘Awful April’, a peak not seen since January 2024.
Worryingly, it was significantly more than the 3.3 per cent analysts had pencilled in, with Ms Reeves acknowledging the figures were ‘disappointing’ and her national insurance hikes were partly to blame.
Core CPI – excluding energy, food, alcohol and tobacco – was also at the highest for a year.
The grim data will fuel Bank of England concerns about underling pressures, with chief economist Huw Pill having already warned that interest rate cuts have been too fast.
Experts immediately suggested that Threadneedle Street might pause reductions at the next monetary policy committee meeting next month. The Bank had forecast that inflation would top out at 3.5 per cent in the third quarter of the year.
The spike comes after Ofgem‘s energy price cap rose by 6.4 per cent in April, having fallen a year earlier.
That was alongside a raft of bill rises for struggling households, including steep increases to water charges, council tax, mobile and broadband tariffs.
Meanwhile, Labour’s NICs and minimum wage increases will have been stoking pressure in the system.
Shadow Chancellor Mel Stride said: ‘The Chancellor has repeatedly refused to rule out another tax raid in the autumn and now we know why – Labour’s top brass want to come back for more.’
