Politics

Rachel Reeves Allies Blast Angela Rayner Over ‘Dodgy’ Tax Math

Published on May 27, 2025

Allies of Shadow Chancellor Rachel Reeves have accused Deputy Prime Minister Angela Rayner of making significant mathematical errors in a leaked internal memo that outlined proposals for tax increases—errors that have since drawn criticism from economists and Treasury insiders.

The document, obtained and reported by The Telegraph last week, was circulated by Rayner’s office in mid-March. It presented eight potential tax-raising measures intended to generate an estimated £3 billion to £4 billion annually. However, Treasury officials close to Reeves suggest those figures are overly optimistic and argue the real revenue would fall well short of the projections.

While Treasury insiders have not publicly identified specific inaccuracies in the memo, several independent tax experts have cast doubt on the numbers used. Their comments indicate a growing internal rift within Labour over economic strategy, particularly as Rachel Reeves has made it clear she favours generating funds through spending cuts rather than tax hikes.

One of the most controversial items in the memo involved scrapping inheritance tax relief for shares listed on the Alternative Investment Market (AIM), a subset of the London Stock Exchange. The memo claimed this could bring in between £100 million and £1 billion each year. However, Dan Neidle, founder of Tax Policy Associates, dismissed the upper-end figure as unrealistic, saying:
“We’d be looking at around £100 million rather than £1 billion.”

Another proposal concerned reintroducing the pensions lifetime allowance, which was abolished by Chancellor Jeremy Hunt in March 2023. The limit had previously capped tax-free pension savings at £1,073,100. Rayner’s memo suggested reinstating the cap could raise £800 million annually.

But former pensions minister Steve Webb expressed scepticism. He warned that the actual gains would likely be much lower due to the complexity of reintroducing the policy without unfairly penalising savers who had acted in good faith under the abolished rules.

“Bringing back the lifetime allowance would not be a quick revenue raiser,” Webb said.
“To avoid charges of retrospective taxation, the Treasury would need to protect people over the new limit and spend time designing that arrangement. They would also need to avoid the risk of NHS consultants retiring early because of pension tax limits.”

Webb added that Labour would face two unpalatable choices: either implement a higher lifetime allowance—thus reducing the potential revenue—or create exemptions for certain professions, which could spark accusations of unfairness.

Labour had previously committed to restoring the allowance but reversed course ahead of the general election, citing administrative challenges.

The internal criticism of Rayner’s tax proposals highlights ongoing tensions within Labour’s top ranks as the party refines its fiscal policies in preparation for government.

Credit: PA/Stefan Rousseau