Angela Rayner 'calls for migrant benefits to be slashed' and urges Rachel Reeves to make changes - after Deputy PM challenged Chancellor's economic approach
Bold proposals, outlined in a leaked memo revealed by The Telegraph, also suggested making it harder for immigrants to receive Universal credit.
Ms Rayner even said Labour should raise the fee migrants pay to use the NHS, in policies she and her team claimed were 'contentious' but still 'worthy of consideration'.
Under current policies, introduced under the Tories in 2015, foreigners on work visas pay to access healthcare - a fee currently set at £1,035.
The 'radical' policies further included limiting access to the state pension.
The latest revelations come after Ms Reeves was hit with a triple blow to her authority.
The Deputy PM suggested launching the plans in the Spring Statement - and hoping to get them over the line by the Autumn Budget.
'Migrants who have spent five to 10 years in the UK generally receive access to a broad range of welfare entitlements,' a section read, as reported by the broadsheet.
'Indefinite leave to remain in the UK confers access to core welfare entitlements such as Universal Credit, and 10 years of National Insurance contributions confers eligibility for some state pension provision.
'Those who arrived in the UK during the period of very high immigration in the past few years will become eligible for indefinite leave to remain over the course of this Parliament.'
On a humiliating day for the Chancellor, alongside Ms Rayner challenging her economic approach Sir Keir Starmer U-turned on winter fuel cash and official figures showed a jump in inflation.
The Chancellor was out of the country at a G7 meeting in Canada as the Prime Minister announced a screeching reverse on her hated decision to axe the winter fuel payment for 10 million pensioners.
Left-wing Labour MPs rallied behind Ms Rayner's demand, prompting the Tories to claim that the Cabinet was in 'open warfare' over taxes.
Kemi Badenoch taunted Sir Keir that his deputy was 'on manoeuvres' and 'calling the shots' on the economy.
The third setback for the Chancellor came in the form of official figures showing that inflation jumped to 3.5 per cent last month, despite Ms Reeves's claim she is tackling the cost of living.
Her controversial decision to means test winter fuel payments was widely blamed for the party's disastrous performance at the local elections and Runcorn and Helsby by-election on May 1.
Sir Keir yesterday pledged to widen eligibility for the payments, which are worth up to £300.
But, on a chaotic day, his officials were unable to say who would benefit and when they would receive the cash.
During clashes in the Commons, Tory leader Mrs Badenoch told the PM: 'There is open warfare in his Cabinet. The Deputy Prime Minister is clearly calling the shots.
'What have we learned? We are heading for new tax rises. We know that inflation is up. It is just more and more bad news from a Prime Minister who has lost control.'
Labour backbenchers welcomed the partial U-turn last night, but warned it would not be enough to quell a rebellion over the benefit cuts next month that are opposed by Ms Rayner.
Her intervention is likely to embolden MPs demanding the end of the two-child benefit cap, the scrapping of the Chancellor's fiscal rules and the introduction of some form of wealth tax.
Allies denied that the Deputy PM was trying to position herself as a champion of the Left with an eye to a future leadership bid.
But one said she was sick of defending controversial cuts, adding: 'She's had to eat a lot of s***'.
Former frontbencher Andy McDonald said a lot of his colleagues 'are concerned that the Chancellor's fiscal rules and spending cut proposals hit those on lower incomes'.
He said: 'Proposals to increase tax revenue from the wealthy would make tax fairer and support public services.'
Neil Duncan-Jordan, Labour MP for Poole, told the BBC the proposals to increase taxes were 'absolutely' among things the Government should be considering.
And Jon Trickett said the winter fuel cuts were 'a major error' and 'ought to be reversed in total now'.
Ms Rayner wrote to the Chancellor in March, ahead of the Spring Statement, proposing eight tax increases, The Daily Telegraph revealed yesterday.
They included reinstating the pensions lifetime allowance, changes to dividend taxes, a raid on the million people who pay the additional rate of income tax and a higher corporation tax level for banks.
Last night it emerged that Ms Rayner also urged Ms Reeves to consider making it harder for immigrants to access the state pension and benefits.
The timing of the leak has also raised eyebrows, coming just a few weeks before Ms Reeves announces real terms cuts in spending for several government departments – including Ms Rayner's Ministry of Housing, Communities and Local Government.
Work and Pensions Secretary Liz Kendall and Environment Secretary Steve Reed yesterday insisted the Cabinet were 'united' on the economy.
Asked whether she agreed with Ms Rayner that rather than slash benefits she should hike taxes on high earners and savers, Ms Kendall told reporters: 'The entire Cabinet backs Rachel's economic strategy to grow the economy, drive up living standards, increase jobs. We actually have raised taxes on some of the richest in this country.'
Ms Kendall insisted benefits cuts were essential, regardless of the strains on the public finances.
She is planning a £5billion package of cuts, which will make it harder to claim disability payments.
It will be voted on in the Commons next month and as many as 170 Labour MPs could rebel.
In a speech yesterday, Ms Kendall insisted she was listening to her colleagues' concerns, but said: 'Whatever the fiscal position that the Government faces, the system as a whole needs to change. We are an older, sicker nation – we have more people with disabilities and health conditions.
'I don't think the welfare state in its broadest sense is meeting that challenge.'
She added: 'I'm not doing this to be tough, I'm doing this because I believe there is a better way to transform people's lives.'
A source close to the Chancellor said last night: 'Under this Chancellor we have secured the highest growth of any major economy since the start of the year, four interest cuts helping millions of homeowners, secured three trade deals and given millions of people a pay rise.'
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