Rachel Reeves's allies warn Angela Rayner 'got maths wrong' on leaked memo

The Rayner memo outlined eight options for tax rises, however, treasury figures suggest the plans would raise far less money than suggested.

Many have suggested Rayner's stance is a way to get backbench Labour MPs back on side who are concerned about potential welfare cuts.

The memo proposed a total of between around £3billion to £4billion a year in tax revenue could be brought in.

However, Treasury insiders told The Telegraph they thought some of the numbers cited were too high and the proposals would generate less money than claimed in actual fact.

One proposal involved the removal of inheritance tax relief for shares in the Alternative Investment Market (AIM), a subset of the London Stock Exchange that helps smaller companies raise capital, which could raise "between £100million – £1billion per year" according to the memo.

However, tax lawyer Dan Neidle said the figure was closer to the lower end of the scale at around £100million.

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Another suggestion reported by The Telegraph involved the reinstating of the pensions lifetime allowance, which placed a cap of £1,073,100 on the amount of pension that could be amassed without triggering higher tax charges.

The policy was scrapped by then-Chancellor Jeremy Hunt in March 2023.

While the Rayner memo proposed reinstating it would lead to an £800million a year boost, pensions experts suggested that might not be the case.

Steve Webb, a partner at LCP, a pension consultant and Liberal Democrat MP during the coalition, said: "Bringing back the lifetime allowance would not be a quick revenue raiser.

"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."

The alleged rift between Rayner and Reeves was played down by the Deputy Prime Minister, when she told reporters at the weekend she "never" wants to be leader of the Labour Party.

She told Sky News: "I have no desire to go for the leadership of the Labour Party.

"My desire is to deliver for the people of this country who have given me opportunities beyond what I could have dreamed of."