John Healey has sought to calm business concerns ahead of the Budget, promising to reduce the costs facing companies and support firms that generate profits.
With less than a week before the closely watched fiscal statement, the Chancellor used an interview to strike a strongly pro-business tone and reassure entrepreneurs that their interests would be taken into account.
However, one high street leader said retailers would be “choking on our cornflakes” at the comments, branding Labour’s first two years in office “horrific” and “pretty brutal”.
Pressure has mounted over how Mr Healey intends to balance the nation’s finances as the economic impact of the Middle East crisis continues. Banks are widely expected to face scrutiny as ministers look for additional sources of revenue.
Speaking to The Times, the Chancellor said he recognised that businesses, like households, had been hit hard by the cost-of-living crisis.
“I want to be a chancellor who supports British businesses making a profit, as well as the entrepreneurs who challenge convention, develop new ideas and, in many cases through sheer bloody-mindedness, keep their companies going through difficult times,” he said.
John Healey used an interview to make a pro-enterprise case less than a week before the Budget
Mr Healey accepted that companies had faced “a lot of pressure” in recent years, while continuing to defend Rachel Reeves’ substantial rise in national insurance contributions.
He added: “When I talk about the cost of doing business and the need to recognise it in the same way we acknowledge pressures on household living costs, I am conscious of that as I prepare for the Budget.”
In an effort to ease fears that entrepreneurs could be targeted, Mr Healey has indicated that capital gains tax rates will remain unchanged.
He also suggested on Wednesday that households struggling with rising energy bills could receive some form of “breathing space”.
Consumer campaigner Martin Lewis believes the Warm Home Discount could be increased from £150. The scheme is currently restricted to people receiving certain benefits.
At Prime Minister’s Questions, Andy Burnham appeared to suggest removing standing charges from gas bills. But unless the costs disappear entirely, shifting them into unit prices could leave households with higher consumption paying more.
The difficult financial backdrop was made clear on Wednesday when official data revealed that the UK’s total debt had reached the landmark figure of £3 trillion.
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The threshold was crossed after public sector borrowing came in above expectations, reaching £24.5 billion last month.
Inflation also proved stronger than forecast, climbing to 3.5 per cent in the 12 months to September.
Economists said the unexpected increase in prices could make a Bank of England interest rate rise next month almost certain, adding to the pressure on mortgage holders. Some analysts are already predicting a further increase in December.
Higher inflation could provide Mr Healey with an additional tax windfall, economists have suggested, as frozen income tax thresholds push more people into higher tax bands until 2031.
Although the extra revenue may help cover rising debt interest payments, it would also squeeze household finances and place further pressure on public services unless government departments receive more funding.
Andrew Murphy, chief executive of toy chain The Entertainer, said retailers on the high street continued to face serious difficulties.
Asked on BBC Radio 4’s Today programme what he thought of Mr Healey’s latest comments, Mr Murphy said: ‘Once we’ve finished choking on our cornflakes, it’s extraordinarily welcome if it turns into decisive action.
‘Just to put this all in context the OECD’s tax and wages study this year found that the UK had the largest rise in the tax burden on labour of any OECD country… 16 times the OECD average.
‘It really has been a horrific couple of years for not just business and business entrepreneurs, but those that they would seek to employ.’
Mr Murphy was asked whether it would be enough if Mr Healey only cut regulation at the Budget.
‘He doesn’t have a lot of money to play with, and we all accept that, but if it’s just tinkering around the edges it’s not going to make a decisive difference,’ the business chief said.
‘We need the employer national insurance threshold to move back up so we can employ more people on eight and 12 hour contracts – typically students, young people, where we know we’ve got a youth unemployment problem.
‘And we need business rates to change as well.’
Mr Murphy said if Mr Healey held off from taking any major measures next Wednesday that would be ‘better than two pretty brutal years previously’.