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Deputy prime minister Angela Rayner wrote to chancellor Rachel Reeves shortly earlier than the Spring Assertion to make the case for large tax will increase, in an indication of deep splits on the prime of the federal government over financial coverage.
Rayner proposed eight potential tax rises, together with reinstating the pensions lifetime allowance and the next company tax price for banks in a memorandum to Reeves.
The measures would elevate £3bn to £4bn a yr, in keeping with estimates cited within the doc, which was despatched two weeks earlier than the Spring Assertion on March 26.
Reeves seems to have ignored Rayner’s solutions, as a result of the chancellor used the assertion to stipulate cuts to public spending quite than tax rises to be able to comply together with her fiscal guidelines.
Nonetheless, Reeves is anticipated to contemplate tax will increase forward of the autumn Price range as public funds have deteriorated.
Rayner’s memo to Reeves — obtained by the Each day Telegraph — proposed restoring the £1mn pensions lifetime allowance and elevating company tax on banks from 28 per cent to 30 per cent.
The memo additionally advised ending inheritance tax reduction on shares for the Various Funding Market, scrapping the £500 tax-free allowance for dividends, and growing the tax charges paid on dividends by the rich.
Different proposals included freezing the edge at which the 45p further price of earnings tax takes impact, and growing taxes in two methods on individuals who use firms to commerce housing with out paying stamp responsibility.
Rayner’s memo, labelled “various proposals for elevating income”, mentioned the measures wouldn’t break Labour’s 2024 election manifesto promise to not elevate taxes “on working individuals”.
Her doc is prone to be seen as an try by the deputy prime minister to pitch herself as a typical bearer for the dwindling variety of leftwing ministers in Sir Keir Starmer’s cupboard.
The prime minister has more and more surrounded himself with extra centrist “Blairite” ministers and advisers.
Rayner’s memo additionally highlights jitters amongst some ministers and Labour MPs concerning the chancellor’s efforts to pare again spending.
Many Labour MPs are uncomfortable with Reeves’ minimize to the abroad help funds and makes an attempt to curb welfare spending by way of measures similar to tighter eligibility exams for private independence funds.
Rayner’s memo was despatched across the time that the Monetary Instances revealed that she was amongst a number of ministers elevating issues throughout a March cupboard assembly about cuts anticipated in the summertime spending evaluation.
Some ministers questioned throughout that assembly whether or not taxes could possibly be elevated as an alternative choice to spending cuts.
Tax rises could be controversial provided that Reeves used final October’s Price range to raise the tax haul by £40bn a yr, together with by way of an enormous improve in employers’ nationwide insurance coverage contributions.
Mel Stride, Conservative shadow chancellor, mentioned Labour’s most senior ministers had been debating which taxes to lift subsequent.
“The chancellor has repeatedly refused to rule out one other tax raid within the autumn, and now we all know why — Labour’s prime brass, together with the deputy prime minister, wish to come again for extra,” he added.
Neither Reeves’ nor Rayner’s spokespeople commented on the memo, however one authorities aide mentioned it was commonplace for dialogue papers to be commissioned and exchanged on an off-the-cuff foundation.
One other aide mentioned Rayner’s doc shouldn’t be seen as an endorsement of any specific proposals.
“We don’t touch upon leaks,” mentioned a authorities spokesperson.
