Sir Keir Starmer’s cabinet is deeply divided over economic policy, with senior ministers fearful further measures to target the rich in next month’s Budget could accelerate the wealth exodus from Britain.

Cabinet ministers have told the The Independent they believe Rachel Reeves has already gone too far with measures targeting the wealthy and businesses, and have urged the chancellor to change course if she is to have any hope of achieving growth.

They cited “anti-aspiration” measures such as the abolition of non-dom status and VAT on private school fees as key drivers of wealth away from the UK, saying they are “harming this country”. Further measures reportedly being considered include a property tax on high-value homes and a new bank profits tax.

Ministers have instead urged the prime minister and Ms Reeves to consider “efficiency savings” and cuts to fill a Budget black hole estimated to be between £30bn and £40bn.

Those on the left in Labour have noted that the recent reshuffle has “handed more power to the right of the party” while left-wingers who support wealth taxes have been demoted or pushed out.

But a powerful group within cabinet on the right of the party believes the government is failing to rein in spending and needs to be more ready “to reform the state in a Labour way.”

One minister said: “The trouble is we have crossed a line in trying to encourage aspiration. The non-dom change and the VAT on school fees have sent the opposite message.”

Noting the record number of millionaires leaving London in particular, the minister added: “It’s doing a lot of harm to the country.”

Another cabinet minister said: “I just think the non-dom changes made no real sense. Why do we want people with money to move it out of the country? It is really bad for London.”

Ms Reeves is currently refusing to budge on the manifesto promise not to raise VAT, income tax or employee national insurance contributions, but is facing mounting pressure is mounting there too.

However, one of her firmest allies in sticking to this pledge is new welfare secretary Pat McFadden, who has warned colleagues that “election wins are hard to come by and that manifesto promise was key to achieving it”.

He is in charge of trying to revive welfare reform after the government’s plans to slash disability payments were derailed by a massive rebellion by Labour MPs before the summer.

However, there is another faction within the cabinet that is backing growing calls from unions and Labour members for wealth taxes to plug the hole in the nation’s finances, such as a property tax that would hit those who have high-value homes.

There are others who are supporting the TUC’s campaign for a new bank profits tax and to hit the super-rich with a wealth tax.

One minister said: “It only seems fair that the rich carry the burden.”

However, question marks have been raised over whether so-called wealth taxes can fill the Budget black hole or would do more damage.

Professor Stephen Millard, deputy director of the National Institute of Economic and Social Research (NIESR), has warned that Ms Reeves will eventually have to break her manifesto promise not to raise any of the big taxes – VAT, income tax or employee national insurance contributions.

The NIESR estimates that the black hole will be above £40bn, and Prof Millard warned: “It is likely that, absent any change in policy, the chancellor will have a large gap to fill to meet her fiscal rules; a reduction in spending would be hard to achieve given we’ve just had a comprehensive spending review.

“It is likely that any change to the rules enabling the chancellor to increase borrowing would result in an adverse market reaction; so the chancellor will need to raise taxes.

“Given our estimate of the extent of the gap, we do not think that the Chancellor will be able to fill it by ‘tinkering’ with lots of changes to the non big four taxes; so we think she will have to raise either income tax, NICs or VAT.”

Isaac Delestre, senior research economist at the Institute for Fiscal Studies (IFS), warned: “If the Office for Budget Responsibility (OBR) forecast deteriorates and the chancellor wants to stick to her fiscal rules she will either need to deliver spending reductions or tax increases.”

Donald Trump administration’s tariff collections – running into billions of dollars – is threatened in case the Supreme Court decides to strike down the US President’s tariff policies. Trump himself has warned that any decision against his tariff policies would spell disaster.Businesses, which have paid huge amounts in the last few months due to country-based tariffs, believe that getting back refunds in case the tariffs are deemed illegal by the Supreme Court, would be a nightmare.

Tariff refund nightmare

To begin with, this would create administrative challenges involving extensive refund processing. If these nation-specific tariffs are ruled unlawful, the United States might need to return most of the $165 billion in customs duties collected in the current fiscal year to the businesses that paid them, according to a Bloomberg report.However, obtaining refunds will be complicated; reimbursements typically come via paper cheques through a slow process, and whilst the government could expedite mass repayments, experts believe this is doubtful.“The customs authorities won’t simply distribute refunds to importers freely,” Lynlee Brown, global trade partner at EY was quoted as saying by Bloomberg.The uncertainty surrounding the potential refund process exemplifies the broader confusion that businesses and financial markets have experienced since the implementation of Trump’s tariff policies.Several importers have abandoned expectations of receiving reimbursements, even if the court rules in their favour.“I have zero faith we’d ever get anything. Just zero,” expressed Harley Sitner, who owns Peace Vans, a Seattle-based classic camper van repair and restoration business.

More than half of tariff revenue at risk of refund

Sitner told Bloomberg that the unpredictability of Trump’s trade policies is more problematic than the actual tariff payments, which he views as irretrievable expenses. Following unexpected tariff charges ranging from $221 to $17,000, sometimes arriving months after receiving goods, Sitner has discontinued importing international inventory.“Just yesterday we got a small shipment from Germany worth $2,324 and it came with a $1,164 tariff charge. We can’t back out,” Sitner stated.Various customs brokers report being approached by Wall Street organisations interested in purchasing rights to potential refunds, offering importers an opportunity to recover a portion of their possible entitlements.The significant increase in customs duties – a rise of $95 billion compared to the previous year – is primarily attributed to Trump’s import tariffs affecting multiple economies, which became effective in August, as analysed by Bloomberg Economics. Two lower judicial bodies have ruled that Trump lacked the authority to implement tariffs under the International Emergency Economic Powers Act.Should the Supreme Court uphold these earlier decisions, approximately 50% of the customs duties collected by the United States this year could be subject to refund. However, the process for businesses to reclaim these funds remains uncertain. Despite the government shutdown, tariff-related operations have largely continued uninterrupted.The United States Customs and Border Protection regularly processes refunds for importers in cases of overpayment or regulatory changes, with the Treasury Department issuing the payments. However, this reimbursement process is not automatically initiated.In line with statutory requirements, importers and their customs brokers must adhere to precise timelines and documentation procedures to maintain eligibility for refunds. Currently, the system predominantly relies on paper cheques for disbursement.Despite the Treasury’s directive from the Trump administration to discontinue cheque payments by September 30, the Customs and Border Protection (CBP) only initiated its first phase last Tuesday in what will be an extended implementation process. The system’s completion before any court decision appears unlikely without accelerated efforts.Tom Gould, a customs consultant from Seattle, suggests that potential refunds might result in “it’s possible that we’ll see millions and millions of paper checks being mailed out because each shipment, each customs entry, will have its own.”The process could be problematic. According to the Bloomberg report, due to regulatory requirements, customs refunds are exclusively sent to sanctioned domestic banks in dollars, requiring foreign importers to receive their refunds through international postal services or utilise a broker’s account within the United States.Worryingly, there has been a series of stolen cheque incidents in recent years. According to Gould, refund cheques were intercepted during postal delivery and traded on the dark web before being encashed.The administration possesses various options to expedite refunds, including automated processing of claims using existing system data. CBP has previously implemented refund rationalisation measures.Customs officials developed a framework to facilitate refund disbursement for items eligible under duty exemptions through the Generalised System of Preferences. Despite Congress allowing this programme to expire multiple times since the 1980s, it was subsequently renewed retroactively.Importers would input specific codes indicating GSP eligibility, even during programme inactivity. Gould suggested that the agency could similarly analyse internal data to identify IEEPA code-related tariff payments.Alternative procedures exist, though they might be complex. Legal experts indicate individual importers could be compelled to initiate separate legal proceedings to recover their funds.The authorities might require submission of protests or post-summary amendments, accompanied by comprehensive payment documentation and importer records, despite the government already possessing this information.EY’s Brown recommends importers maintain complete records from CBP’s Automated Commercial Environment platform, documenting entry dates and deadlines systematically to enhance refund possibilities.Despite potential simplified procedures by CBP, the complex nature of financial transactions within supply chains presents additional challenges.For shipments managed through commercial carriers like FedEx Corp. and United Parcel Service Inc., who handle documentation and tariff payments, CBP would direct refunds to the registered importer – the courier service rather than the goods’ owner.This arrangement could generate complications between the actual importers and courier services, creating another obstacle for businesses seeking reimbursement.

Tariff collections: Trump admin may not let go easily

Trump has valued the tariff income, declaring it has restored national wealth. He and his supporters have suggested various uses for these funds, including reducing national debt, supporting struggling agricultural sectors, and potentially distributing payment cheques to US citizens.This suggests the Trump administration will be reluctant to release these funds if the tariffs are invalidated, and they are likely to swiftly implement new levies using alternative legal frameworks should this occur. The Supreme Court is scheduled to review arguments in November regarding this matter.

The Conservatives have said they would cut energy bills by 20% by axing the carbon tax and abolishing wind farm subsidies.

Shadow energy secretary Claire Coutinho claimed these two policies would save the average family £165 a year.

Speaking at the Conservative Party Conference, Ms Coutinho told members that scrapping the carbon tax would “instantly” cut bills by almost £8 billion.

She said: “The next Conservative Government will axe the carbon tax on electricity generation.

“When Ed Miliband blames gas for high energy bills, what he doesn’t tell you is that over 30% of what we pay for gas power is not to pay for fuel, but to pay for a carbon tax that the Government chooses to impose.

“Now, we know that we’ll need gas to keep the lights on for decades, so it just adds extra costs to our bills for no reason.

“But here’s the rub: the carbon tax inflates the cost of almost all other types of electricity too.

“So, all the wind and solar farm owners pocket those higher prices as higher profits…

“Axing the carbon tax would cut bills instantly by almost £8 billion a year.”

Ms Coutinho branded wind farm subsidies “the biggest racket going” as she promised her party would scrap them if they won the next general election.

She said: “We’ll scrap Ed Miliband’s old rip-off wind farm subsidies.

“Back in 2008, Ed Miliband in his infinite wisdom chose to double the subsidies on offer for wind farms.

“That means when the wind blows, there are wind farms getting up to three times the market price of electricity, and you’re paying for that through your bills. It’s the biggest racket going.

“We closed the scheme when we were in office, but we’ll go further and say we must scrap those subsidies for good.

“Our energy system is not here to prop up the profits of multimillion-pound wind developers at billpayers’ expense. It’s here to deliver cheap, reliable energy for the country.

“Together, our policies to axe the carbon tax and scrap Ed’s rip-off wind subsidies would cut people’s electricity bills by 20%.

“The average family will save £165 a year off their electricity bill.”

Ms Coutinho also told members that the Conservatives would scrap Great British Energy, branding it energy secretary Ed Miliband’s “vanity project”.

She said that Mr Miliband promised that Great British Energy would lead to a “mind-blowing” reduction in bills, but that this has not come to pass.

The shadow energy secretary said: “Only Ed Miliband could launch an £8 billion energy company that won’t produce any energy.

“Let’s call it what it is: a vanity project that won’t cut bills. So we will scrap it.”

Ms Coutinho reiterated the Conservatives’ pledge to repeal the Climate Change Act, claiming it is their “duty” to change the law, as it is “not working in the national interest”.

She also emphasised that a Tory government would scrap the ban on new oil and gas licences, reverse the energy profits levy and “back the North Sea”, saying: “As long as we need gas, as much as possible should come from Britain.”

The shadow energy secretary also hit out at Reform UK, saying their claim that abandoning net zero could save households £1,000 per year is “garbage”.

She said: “The average bill is only £850. What’s he going to do, go round writing people cheques?

“If you think any politician can promise you electricity for free, then I’ve got a bridge to sell you.”

Responding, a Labour Party spokesperson said: “The Conservatives simply want to repeat the same failed energy policies which saw the worst cost-of-living crisis in a generation happen on their watch.

“Their anti-growth, anti-jobs, anti-investment stance on cancelling clean energy investment would make Britain more reliant on insecure, expensive fossil fuels, keeping bills high for generations to come.

“And just last week their pledge to scrap the Climate Change Act united a remarkable coalition of business bosses, workers, faith leaders, and even Conservative politicians in opposition to their plans.

“It’s the same old Tories, with the same old policies. They didn’t work then and you can’t trust them now.

“Only this Labour Government is delivering record investment in clean, homegrown renewables and nuclear that will help bring down bills for good.”

Dr Simon Cran-McGreehin, head of analysis by the Energy & Climate Change Unit (ECIU), argued that renewables reduce the overall cost of electricity by pushing gas power out of the market.

He said: “People may not realise it, but their bills would be higher today without the increasing role that wind and solar farms running on free sunshine and wind are playing by reducing our dependence on gas power.

“This also means things could have been even worse during the peaks of the gas crisis, had it not been for renewables – indeed, anything that avoids gas generation helps to limit prices, including interconnectors and our old nuclear power plants.

“Prices can spike when wind is low and gas power plants come on, but this is more than made up for by the overall savings on prices that wind farms deliver the rest of the time.”