John Healey backs growth but says Labour must be honest on spending

Chancellor ducks questions on whether he will have to raise taxes but says he will stick firmly to fiscal rules

John Healey has said boosting economic growth will be his defining mission as chancellor as he warned Labour had to “be honest” about the need to control public spending at next month’s budget.

In his first big speech since taking the job in July, Healey said the top priority for his 28 October budget would be to support stronger growth across the UK while sticking firmly to the government’s fiscal rules.

“I want to be the chancellor that gets things done and I want to see growth driven from more places across the UK,” he said.

Against a backdrop of jittery global financial markets , the chancellor said he and Andy Burnham were “in lockstep” in their commitment to meeting the government’s self-imposed target to balance day-to-day spending with tax receipts by 2029-30.

With the public finances under pressure from soaring long-term bond yields, which hit an 18-year high last week, Healey argued that stronger growth was the most sustainable way to balance the books. However, he also signalled that his budget would require Labour “being honest about the need to control government spending”.

Economists have warned the chancellor could be forced to increase taxes or cut spending in response to rising spending pressures and the economic fallout from the war in Iran triggering turmoil in global bond markets.

The UK’s 10-year borrowing costs rose slightly on Monday amid pressure on governments worldwide, as fears over the impact of the war pushed the price of oil closer to $100 a barrel.

Aiming to soothe concerns in a speech to business leaders at a manufacturing centre in Coventry, Healey said Britain was continuing to pay a “Truss penalty” almost four years since the former Conservative prime minister’s ill-fated mini-budget triggered a meltdown in the UK government bond market.

With Labour under pressure amid questions over Burnham’s tax and spending priorities and as the UK carmaker Jaguar Land Rover – headquartered down the road from the venue for his speech – announced plans to cut 4,000 jobs , Healey said maintaining fiscal discipline was important in an uncertain and volatile world.

“It makes our task in government harder. It makes the task of every business looking to invest much harder, too,” he added.

Business groups said they welcomed the chancellor’s pro-growth message, including pledges to devolve tax and spending powers to regional mayors and also his promise to “take an axe” to regulations he said were holding back business investment.

Louise Hellem, the chief economist at the Confederation of British Industry, said: “Firms will welcome the positive signals of intent from the chancellor and will now be looking ahead to the budget to see whether the government can match its ambition with decisive action to cut business costs and give firms the headroom they need to invest.”

The chancellor’s critics said his speech was light on detail despite the mounting pressure on the economy.

Andrew Griffith, the Conservative shadow chancellor, said: “John Healey sounds increasingly like continuity Rachel Reeves. Warm words about growth will not make growth a reality, or cover up the enormous damage Labour have done to businesses and family finances.”

Robert Jenrick, Reform UK’s Treasury spokesperson, said: “On the day 4,000 people are losing their jobs, Healey gave a dire and dreary speech that will change absolutely nothing.”

Refusing to be drawn on the details of his tax and spending plans less than two months before the budget, Healey promised to stick to Labour’s manifesto commitments not to raise taxes on working people. However, he signalled the government could look at finding savings from the welfare bill by tackling youth unemployment.

“As the prime minister has said, there is a need to bring down welfare costs. And most importantly for me we have to get more of Britain working again,” he said.

The chancellor ducked questions on whether taxes would need to rise and also a suggestion from the British Chambers of Commerce that the government should scrap the pensions triple lock to fund a cut in employer national insurance contributions to help support youth jobs.

The government is awaiting the findings of a highly anticipated review into youth worklessness by the former Labour cabinet minister Alan Milburn, which Healey said would “address this scar of youth unemployment”.

Healey said there was a “moral duty” and a “fiscal duty” to supporting young people to find work.

“A person coming off benefits and into work saves the taxpayer money. And that becomes a win-win when those people start paying tax themselves,” he said.