John Healey, the new British Chancellor, is facing calls to rule out tax increases in the upcoming Budget, as political opponents warn that the Labour government's spending plans could destabilize the nation's economy.
Healey is scheduled to deliver a major speech outlining his strategy for stimulating private sector investment through increased state intervention. The address also aims to reassure financial markets, which have seen government borrowing costs rise due to concerns over Labour's fiscal policies.
Andrew Griffith, shadow chancellor, urged Healey to commit to no further tax rises, warning in the Daily Mail that the current Chancellor risks repeating the actions of his Labour namesake, Denis Healey, who sought an International Monetary Fund bailout in 1976. Griffith stated, "He must be careful or he could risk being the second Healey to bankrupt Britain as Chancellor."
Reform UK's Treasury spokesman, Robert Jenrick, echoed these sentiments, telling the Mail that Healey "must do the responsible thing and rule out tax rises." He added, "The British people need another tax assault like a hole in the head."
In a notable intervention, Business Secretary Jonathan Reynolds also appeared to caution against relying on significant tax increases to fund Labour's agenda. Speaking to Sky News, Reynolds stated, "There is no taxation answer that will meet the British people's expectations on social care or defence or public services." These comments suggest internal nervousness within the Labour party about the potential economic impact of adding to the £70 billion in tax hikes already implemented since the election.
Reynolds also indicated that the welfare budget requires reduction, citing reports that disability benefit claims in the UK have increased 50% faster than in Ukraine since the pandemic. While acknowledging the difficulty in comparing welfare systems, he conceded that the government is "spending too much on welfare."
Healey's speech is expected to emphasize support for businesses, with the Chancellor advocating for an "active, accountable state" to remove obstacles and create conditions conducive to investment. As a preliminary step, Healey announced plans to streamline corporate reporting rules, projected to save businesses an estimated £450 million annually. He is also set to pledge faster decision-making on planning and infrastructure projects, alongside devolving more power to regional areas. An additional £150 million is allocated to support innovative firms in Northern England.
Despite these initiatives, Healey intends to assure financial markets that spending will remain under control, asserting that "good growth is indivisible from fiscal discipline at any time, but especially in a time of global uncertainty." The government faces challenges, including rising borrowing costs that could significantly erode a £23 billion fiscal buffer and a £4.7 billion shortfall in the Defence Investment Plan.
Former Chancellor Rishi Sunak advised Healey to rule out tax increases in his speech, arguing it would provide necessary certainty in uncertain times and help stabilize financial markets. Sunak suggested that if adjustments are needed, spending cuts should be prioritized over tax hikes.
The British Chambers of Commerce has also called on Healey to provide businesses with "breathing space" to foster job creation and growth. Their pre-Budget submission suggests cutting employer National Insurance for those under 25, potentially funded by reconsidering the pensions triple lock, a measure pledged by all main parties. Shevaun Haviland, Director-General of the Chambers of Commerce, warned that "piling more taxes on firms, would be a road to ruin, and the quickest way to destroy business confidence."