The document was submitted to the Treasury in March but wended its way into The Daily Telegraph on Wednesday; it proposed eight tax increases. These included reinstating the pensions lifetime allowance and changing dividend taxes; a fresh raid on the million people who pay the additional rate of income tax; and a higher corporation tax level for banks.
The memo is not a direct attack on Reeves’s fiscal approach in which spending cuts rather than tax rises are used to fill the black hole in the nation’s finances. None of the tax rises Rayner proposes would break the Chancellor’s fiscal rules. Rather 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.
square MARK WALLACE An angry Labour rebellion is brewing
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Nervous Cabinet ministers are awaiting next month’s spending review which will set out how much each department has to spend – and crucially where cuts will be made.
Coupled with the continued squeals from businesses after October’s tax hike, and an assurance by Reeves that the country had reached its maximum tolerance for tax rises, where is a beleaguered Chancellor to look next?
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. More senior members of the Government, while mostly sympathetic to their colleagues’ concerns, privately say backbenchers are missing the wider point that the world has changed. They also worry that the call for wealth taxes will only exacerbate capital flight from the UK and allow their political opponents to portray them as adolescent socialists who haven’t moved on from the Jeremy Corbyn years.
An intervention from a Cabinet minister, even done in semi-public manner, now does allow a wider conversation within the party which until now has been shut down. It also marks the return of proper Cabinet Government, with interventions from big beasts rather than nodding dogs. Some of her suggestions could prove popular. A tax on bank profits would be undoubtedly go down well with both Labour MPs and the public.
square YASMIN ALIBHAI-BROWN We think our society is free - it isn’t
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Of course there are discussions at the top of Government about direction. The appointment of Olaf Henricson-Bell, a former Treasury insider was made the new head of the No 10 policy unit in January was a sign of the premier taking more oversight of the Treasury than had previously been the case.
Rayner may have lost this battle, but she may yet win the war on taxes. She may win an even bigger prize: the leadership. Reeves and Rayner also get along well on personal level. Don’t expect the Chancellor to mince any opposition to her becoming the next leader, as Gordon Brown would have done.
Starmer won’t be prime minister for ever. While Rayner is underestimated by many, she enjoys union backing, she has charisma, and her authenticity would be a match for Reform UK’s Nigel Farage.
Like Punxsutawney Phil in the film Groundhog Day, Rayner’s intervention is a politician poking her head out of her hole, sniffing around for signs of spring. She’ll go back in for now, but she won’t be underground forever.
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