John Healey is urged to rule out tax hikes in his Budget amid warnings Labour’s runaway spending might ‘bankrupt Britain’

John Healey was urged to rule out Budget tax hikes last night, amid warnings that Labour’s runaway spending could ‘bankrupt Britain’.

The new Chancellor will use a major speech today to set out his plan to use more state intervention to stimulate private sector investment.

He will also try to calm jittery financial markets which have forced up the cost of government borrowing in recent days, partly because of concerns about Labour’s spending plans.

But last night the Chancellor was warned against hammering business and families with more tax rises in next month’s Budget.

Writing in the Daily Mail, shadow chancellor Andrew Griffith acknowledged Mr Healey faced ‘tough choices’ but urged him to rule out further increases in Britain’s record tax burden.

He warned that the new Chancellor otherwise risks emulating his Labour namesake Denis Healey, who was forced to go cap-in-hand to the International Monetary Fund for a bailout in 1976.

Mr Griffith said: ‘He should commit to no more tax rises. But I fear that, as Labour chancellors always do, he will take the easy way out. 

‘He must be careful or he could risk being the second Healey to bankrupt Britain as Chancellor.’

Reform UK’s Treasury spokesman Robert Jenrick told the Mail: John ‘Healey must do the responsible thing and rule out tax rises. The British people need another tax assault like a hole in the head.’

In a surprise move, business secretary Jonathan Reynolds also appeared to warn against using major tax rises to pay for Labour’s plans.

Mr Reynolds insisted that Labour’s agenda ‘isn’t about going back to the 1970s’, despite Andy Burnham’s frequent claim that Britain has taken a series of ‘wrong turns’ since the 1980s.

He told Sky News: ‘There is no taxation answer that will meet the British people’s expectations on social care or defence or public services.’

His comments reflect nervousness among some Labour figures that the government risks crushing the economy if it adds to the £70 billion in tax hikes introduced since the election. 

It will also be seen as a warning to Mr Burnham about his long-held view that a new ‘death tax’ on all inheritances is needed to pay for social care reform.

Mr Reynolds also warned that the bloated welfare budget ‘does need to come down’ after it emerged that disability benefit claims in Britain are rising 50 per cent faster than in war-ravaged Ukraine.

In his speech today, Mr Healey will go out of his way to praise business, despite having no significant private sector experience of his own.

But he will also argue that more state intervention is needed to create the conditions for business to thrive.

‘I want to see wealth creation in this country,’ he will say. ‘I want to see businesses make a profit. 

‘And to create the conditions for that we need an active, accountable state at all levels to remove blockages and create the conditions for more investment.’

Mr Healey made a down payment on the promise yesterday, announcing plans to streamline ‘outdated’ corporate reporting rules, saving businesses an estimated £450 million a year.

Today, he will pledge to speed up government decision-making on planning and infrastructure, as well as devolving more power to the regions.

A further £150 million will be released to ‘scale up’ the most innovative firms in the North of England.

But Mr Healey will also move to reassure the financial markets that he will not let spending run out of control, despite a string of costly pledges made by the new Prime Minister.

And he will attempt to paint an ‘optimistic’ picture of the economy, saying that Britain is ‘a country turning a corner’.

A Treasury source said: ‘The Chancellor will make clear that good growth is indivisible from fiscal discipline at any time, but especially in a time of global uncertainty.’

Soaring government borrowing costs are on course to wipe out more than half of the £23 billion buffer left by Rachel Reeves against meeting Labour’s fiscal rules. Mr Healey also has to plug a £4.7 billion hole in Labour’s Defence Investment Plan.

He is said to be mulling fresh tax hikes next month, including a raid on bank profits.

Former Chancellor Rishi Sunak urged Mr Healey to break with precedent and use his speech today to rule out tax rises.

Writing in the Sunday Times, Mr Sunak said the move would ‘provide the certainty needed in an increasingly uncertain world’ – and help steady the financial markets holding trillions of pounds of UK government debt.

He added: ‘He should make clear that he’ll not increase taxes in the Budget and that if adjustments are needed, he’ll cut spending.’

Mr Healey is also under pressure to cut the fast-growing welfare budget after both the Conservatives and Reform set out plans for tens of billions of savings.

Sky News reported yesterday that disability claims in the UK have jumped by 38 per cent since the pandemic, compared with 26 per cent in Ukraine, which has been at war since Russia’s full-scale invasion in 2022.

Mr Reynolds said it was ‘difficult to compare systems’ but admitted the government was ‘spending too much on welfare’.

Meanwhile, the British Chambers of Commerce today urges the Chancellor to give firms the ‘breathing space’ they need to create jobs, invest and grow.

In its pre-Budget submission, the umbrella group calls on Mr Healey to cut employer National Insurance for the under-25s to ease the youth unemployment crisis. 

It says the move could be funded in part by scrapping the pensions triple lock, which all main parties have pledged to keep.

Director-General Shevaun Haviland said: ‘We know the government is in a fiscal bind and its choices are limited. 

‘But support for business is not just money out the door, it generates vital economic returns. 

‘Easing cost pressures will give firms breathing space to create jobs, investment and growth.

‘The Chancellor must use his first budget to cut the cost of doing business, allowing everyone to reap the economic benefits. 

‘Piling more taxes on firms, would be a road to ruin, and the quickest way to destroy business confidence.’

– ANDREW GRIFFITH: Healey risks bankrupting Britain if he takes the easy option of just hiking taxes