Labour's Deputy Prime Minister Angela Rayner's Tax Memo Spells Trouble for Chancellor Rachel Reeves

The memo submitted by Rayner to the Treasury in March, proposing eight tax increases, has sparked a debate within the Labour party on fiscal direction. While the Cabinet has had discussions on fiscal direction, never has a memo of this sort been written without the expectation of it being made public. The intervention is a reaction to the sterile debate in the Labour movement about the Government's direction and the worry that any dissent will see so-called critics cast into the outer darkness. Rayner's allies pointed out that the memo was sent by officials and not at ministerial level, and wasn't signed off by her.

Key Takeaways:

• Rayner's memo proposes eight tax increases, including reinstating the pensions lifetime allowance, changing dividend taxes, and a fresh raid on the million people who pay the additional rate of income tax.
• The memo was submitted to the Treasury in March and recently made public, sparking a debate within the Labour party on fiscal direction.
• Rayner's intervention is a reaction to the sterile debate in the Labour movement about the Government's direction and the worry that any dissent will see so-called critics cast into the outer darkness.
• The memo was sent by officials and not at ministerial level, and wasn't signed off by Rayner, suggesting that her allies are trying to downplay the significance of the memo.
• Rayner's memo is part of a wider Labour disquiet that the longed-for Labour administration isn't the sunlit uplands they expected in opposition.
• MPs close to Rayner say she is speaking for a Labour Party increasingly fed up at having to publicly defend Treasury spending cuts and reacting to the kicking voters gave them at the local elections.
• The memo marks the return of Cabinet politics and a precursor of leadership battles to come.
• Some of Rayner's suggestions could prove popular, such as a tax on bank profits.

Statistics:

• 1.5 million homes aim to be built by the end of Parliament, according to Rayner's department.
• 1 million people pay the additional rate of income tax, which is targeted by Rayner's proposed tax raid.
• The Labour party is increasingly fed up with defending Treasury spending cuts, according to MPs close to Rayner.

Sources:

• Angela Rayner's memo to the Treasury
• The Telegraph (Tuesday)
• Labour MPs
• Treasury officials