Angela Rayner has secretly called on Rachel Reeves to hit pensioners and other Britons with tax rises instead of cutting spending, a leaked memo has revealed. The Deputy Prime Minister has been infuriated with having to defend the Chancellor’s spending cuts in recent months and has taken to suggesting tax rises that could mitigate future spending reductions in the forthcoming Budget.
The leaked memo reveals Ms Rayner has specified hiking taxes on pensioners by reinstating the pensions lifetime allowance, as well as reforming dividend taxes. Ms Reeves previously called for the pensions lifetime allowance policy but it was abandoned in Labour’s General Election manifesto. Ms Rayner claims her proposed list of eight tax increases would hand the Chancellor between £3-4billion per year, although this would still force her to make spending cuts in the autumn, according to fiscal forecasts.
The cap on pensions, abolished by former chancellor Jeremy Hunt, previously limited the amount people could save in their pensions before losing tax relief.
The cap previously penalised high-earning public sector workers, including doctors, who were charged 55% on savings over £1,073,100.
Ms Reeves abandoned her objection to the policy after it was revealed that reinstating it could lead to an exodus of experienced staff from the NHS.
In May 2024, NHS pension expert Graham Crossley said: “The potential reinstatement of the lifetime allowance has caused considerable anxiety among doctors, many of whom stand to lose thousands from their hard-earned pensions.
“While there are whispers of exemptions for doctors and other public sector workers, the ambiguity surrounding these promises is causing many to consider early retirement to avoid the financial uncertainty.”
Ms Rayner’s highest-earning tax proposal is the removal of inheritance tax relief on shares for the Alternative Investment Market (AIM), which she claims would raise up to £1billion a year.
Her second-biggest money-making proposal is closing the commercial property stamp duty loophole, used by companies who buy and sell housing.
Two additional proposals target dividends, including the scrapping of the £500 tax-free allowance for the self-employed and increasing tax on dividends paid by the most well-off.
The £500 tax-free allowance was already reduced from £2,000 over the past few years, although abolishing it altogether could bring in around £325million a year.
In May, Ms Reeves was warned that her flagship hike to employer National Insurance has left her facing a whopping £25billion fiscal black hole, which she now needs to fill before the October Budget.
The document, leaked to The Telegraph, was submitted to the Treasury ahead of the spring spending review on March 26.
The Chancellor ignored the Deputy PM’s suggestions, instead announcing £5billion in welfare cuts that sparked fury among Labour Left-wingers.
Shadow Chancellor Mel Stride said: “So now we know. Behind closed doors, Labour is plotting fresh tax hikes on hardworking savers, pensions, and businesses.
“Angela Rayner’s secret memo lays bare the truth – multi-billion tax raid, punishing those who’ve worked hard and saved responsibly.
“This is the same old Labour – divided at the top and dangerously addicted to taxing more and spending more.
“The Chancellor won’t rule out more tax rises because Labour’s leadership is already planning them.”
A spokesman for Ms Rayner did not deny the memo.
