Cabinet ministers have looked at a blueprint for how Labour could cut taxes on work by taking on “vested interests” profiteering from the cost of living crisis.
The draft paper, by the Labour Growth Group and Good Growth Foundation, argues for a complete overhaul of Labour’s economic strategy and messaging to prevent a far-right government.
Policy proposals are still being worked up, but include cutting income tax and abolishing national insurance. Options for how this could be funded include equalising capital gains tax with income tax in certain areas, reforming council tax or taxing landowners.
Sky News understands the report has been looked at by several cabinet ministers and potential leadership contenders.
Advisors to Health Secretary Wes Streeting, former deputy prime minister Angela Rayner and Greater Manchester Mayor Andy Burnham – all tipped as frontrunners to replace Sir Keir Starmer – are among those understood to have engaged with the work.
The report is expected to be published just after the May local elections – the crunch point at which the prime minister could face a leadership challenge if they go as badly as predicted.
Sir Keir has repeatedly insisted he will fight on, so anyone seeking to take him out would need the backing of 80 MPs.
There is a big question mark over who could get the numbers following the move to block Mr Burnham from standing in the Gorton and Denton by-election, which Labour lost.
However, the report being published at a vulnerable time piles fresh pressure on the prime minister, whose tanking poll ratings are often blamed on a failure to tackle the cost of living crisis and communicate who Labour is for.
This report will suggest policies to tackle the cost of living, as well as how Labour can sell them to the public.
It will say Labour needs to redesign the tax system to incentivise hard work, with greater incentives for entrepreneurs and small business owners.
And it will argue that voter anger is fuelled by the belief “doing the right thing” leaves them feeling shafted, and Labour must confront those who make money from taking advantage of people.
Mark McVitie, the Labour Growth Group’s director, told Sky News: “Everyone in politics is correctly diagnosing the cost of living crisis. That’s not enough. You go to the doctor because something’s wrong, but you don’t just want them to tell you you’re ill and they care, you want them to find out why and fix it. That’s what this project is aiming to do.
“Until we can do that and take on the vested interests profiting from the mess, we’re just offering painkillers for a condition that keeps getting worse.”
The Labour strategist said the party must be “laser focused on rewarding work and taking initiative”.
He added: “When someone working 60 hour weeks as a nurse or running a small business is paying a higher marginal tax rate than an institutional landlord, that’s not happening.
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“As a party we need to be squarely on the side of those putting in the work, taking risks and doing the right thing, and not afraid to confront the vested interests who will resist that change.”
The paper has the draft title of Beveridge Report, named after a famous report by Sir William Beveridge, a key figure in designing Britain’s welfare state.
Another focus will be on devolution, with the paper saying it should be vastly expanded so regional mayors have greater fiscal powers.
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More than 100 Labour MPs work with the Growth Group, whose parliamentary chair is former YouGov pollster Chris Curtis.
The group looks at ways to tear down barriers to economic growth, which the government says is one of its central missions.
The UK’s economic forecaster the OBR has predicted GDP to grow by an average 1.5% a year from 2027 to 2030.
However many MPs fear voters will not feel any tangible benefit unless more is done to tackle the everyday cost of living.
Sir Keir began the year with a pledge to be “laser focused” on the cost of living, but the reset has been overshadowed by the Peter Mandelson scandal, while the war in Iran has threatened to push prices up further.
