Rachel Reeves' £1bn stealth tax 'sparks Labour infighting' as manifest pledge on brink

Rachel Reeves could threaten one of her party's key pledges as she mulls a stealth tax that could increase the cost of building a home by up to £50,000. The Treasury has reportedly tabled plans to hike one tax on the construction industry, increasing the amount paid to dispose of soil and rock. Currently, there are two types of landfill tax: a standard rate of £126.15 per tonne for most waste and a lower rate of £4.05 per tonne for less polluting "inactive" waste.

Soil and rock come under the latter option, but this is set to go up over the next five years to bring it in line with the former. This could allow HMRC to rake in at least £1 billion by the end of the decade, The Times reports, but raises concerns of the Government's promise to build 1.5 million homes.

Last year, about 14.4 million tonnes of the 19.1 million tonnes of waste put into landfill either paid the lower amount of tax or was deemed exempt. If this was all charged under the new rate, it would bring in an extra £1.8 billion a year.

Government sources told the outlet that the Ministry of Housing had been "blindsided" by the proposal and was trying to get it "killed off".

Increasing the landfill tax could increase the cost of building a home by £15,000 on average, according to a study by the Home Builders Federation (HBF).

However, challenging sites with things like difficult topographies could see cost increases of more than £50,000.

The study focused on around 8,300 homes currently in construction, and found that the additional cost of building these would be £121 million under the new tax.

The HBF warned that many of the existing sites would become unviable, particularly those on brownfield sites where materials have to be removed before building can start.

A Treasury spokesman said: "The housing secretary has promised to 'build, baby, build' and we are leaving no stone unturned to give people the homes they desperately need.

"We will build 1.5 million homes to restore the dream of homeownership across the country.

"The chancellor makes tax policy decisions at fiscal events and we remain committed to working with businesses to understand the impact of the proposals."