A leaked memo has ignited fresh debate within the Labour government over future tax policy. The Labour tax memo leak revealed that Deputy Prime Minister Angela Rayner’s department proposed new tax hikes ahead of the Spring Statement.
According to the document, Rayner’s team advised Chancellor Rachel Reeves to raise between £3bn and £4bn annually through new tax measures. These recommendations were ultimately rejected by Reeves, who opted for £5bn in welfare cuts instead.
Sources inside the government confirmed departments often share such proposals informally. However, the memo’s content has fueled growing divisions over Labour’s economic direction. As departmental budgets will be announced in June, pressure mounts on the leadership to clarify its stance.
Some Labour figures on the party’s left argue that Reeves should explore wealth taxes. They believe this would avoid deeper cuts to key services. They also want her to ease strict borrowing rules to support day-to-day spending. Reeves has consistently vowed not to borrow for operating costs.
Environment Secretary Steve Reed addressed the controversy during a morning interview. He claimed the entire cabinet remains united behind the government’s economic plan. Reed defended Labour’s current tax policy, pointing to reforms on non-dom tax status. He said these changes already make the wealthiest pay more.
The leaked memo outlined a range of alternative proposals. One suggestion included raising the corporation tax rate for banks. Another recommended extending the freeze on the 45% income tax threshold. This move would bring more high earners into the top tax bracket.
Additional proposals in the memo called for scrapping the dividend tax-free allowance. The document also revived calls to reintroduce the lifetime pension allowance. This cap, removed under the Conservatives, limited tax-free pension savings.
Although Labour initially pledged to reinstate the allowance, the plan was dropped before last year’s election manifesto was finalized.
Opposition figures seized on the leak to criticize Labour’s internal strategy. Shadow Chancellor Mel Stride warned the memo exposes Labour’s desire for more tax increases. He claimed senior figures remain influenced by past leadership ideologies.
He further argued that the chancellor has refused to rule out future tax hikes. This, he said, reflects internal pressure to launch another tax raid in the upcoming Autumn Budget.
The Labour tax memo leak is now reshaping the party’s internal debate. As June’s budget announcements approach, Labour must balance fiscal restraint with demands for fairness.
For more politicsl updates, visit London Pulse News.
