Angela Rayner set for showdown with Rachel Reeves as she demands tourist tax on millions of visitors

Rayner is aligned with big-name regional mayors, including Sir Sadiq Khan and Andy Burnham, as councils push the Treasury to be allowed to charge their own taxes.

However, a senior Government source said Reeves was looking for "quick wins" and did not want to force through constitutional changes that would take time and could backfire.

The move would bring English cities in line with European cities such as Venice, Lisbon, Amsterdam and Barcelona.

While Liverpool and Manchester charge tourists a fee per night, their current powers are limited to small "business improvement districts" and cannot be levied across large areas.

London mayor Sir Sadiq Khan welcomed the tax, saying tourists "don’t mind" paying a "small levy" in European cities.

He said: "We could spend more money improving the public realm, which would encourage more tourists to come but also improve the quality of life for residents in London."

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Shadow Chancellor Mel Stride told The Telegraph: "Labour can’t help themselves, it’s always tax, tax, tax.

"Whether it’s Angela Rayner or Rachel Reeves, the instinct is always the same. More taxes. First, a £25billion jobs tax, now threats of a tourist tax that would hit hospitality hard."

Senior Government sources played down the idea that Reeves and Rayner were in conflict over the issue but did not deny the pair disagreed on the tax.

A spokesman for Rayner’s department did not deny the rift, telling MailOnline only that there were "currently no plans to introduce a tourism tax in England".

The fallout over the tourist tax is the latest in a series of conflicts between Reeves and Rayner after the leaking of a highly controversial memo on tax policy, written by the Deputy Prime Minister.

In the memo, Rayner suggested support for a variety of new taxes on the rich that the Treasury had already ruled out.

The Deputy PM had also been instrumental in pushing for a climbdown over a highly controversial series of benefits reforms which prompted a widespread backbench rebellion.

Sources close to both have insisted that the conflict is not personal and the pair get on in private, but instead have different ideas on how to unlock growth.

Reeves also faces a challenge much closer to home as new ONS data today revealed Government borrowing jumped to a higher-than-expected £20.7billion last month.

The ONS highlighted borrowing over the period was £6.6billion higher than a year prior.

The figure represents the second highest June borrowing since records began, only behind figures seen in 2020 at the height of the Covid-19 pandemic.

The ONS noted that interest payable on debt increased to £16.4billion in part due to a large rise in Retail Prices Index inflation impacting index-linked Government bonds.