Healey refuses to rule out tax rises as he warns Britain is paying the ‘Truss penalty’ on debt

John Healey has refused to rule out further tax rises ahead of the Budget as he delivered his first major speech as chancellor.

The former defence secretary insisted the UK economy was “turning a corner”, but warned Britain has been paying a "Truss penalty" since the former prime minister’s disastrous 2022 mini-budget.

Mr Healey sought to present an optimistic assessment of the UK’s economic future, but delivered the speech as the war in the Middle East and Russia’s invasion of Ukraine continue to have a major impact on the global economy.

Meanwhile, as the chancellor was speaking, Jaguar Land Rover (JLR) announced plans to cut 4,000 jobs in the face of growing global competition, US tariffs and the transition to electric vehicles, highlighting the scale of the challenges Mr Healey is facing.

He repeatedly refused to rule out tax rises, as he prepares to deliver his first Budget in October amid challenging economic conditions and speculation he will hike taxes.

Aked about potential tax rises on Monday, he said: “if I respond to speculation now, that will only fuel more speculation, and it's quite right.

“And every chancellor would say that's for the budget, and I'll set out my plans and the future route for government for this country at that budget.”

Mr Healey also acknowledged the impact of high government borrowing costs and promised to address the rising burden on businesses.

“The prime minister and I are in lockstep in our commitment to meeting the fiscal rules at the upcoming Budget, to balancing the books with a buffer to protect against uncertainty,” he said in a speech in Coventry on Monday.

“To controlling borrowing to bear down on inflation and reducing long-term pressures on our public finances.”

He said the rising burden of debt interest showed “staying true to our values means being honest about the need to control government spending”.

But he insisted there was an “optimistic story” about the UK economy which had “huge latent potential”.

It was, he said, “a country turning a corner, a country whose people, businesses and communities are ready to seize the opportunity of new technologies and new ideas”.

However, he also warned Britain has been paying a "Truss penalty" on the cost of borrowing since 2022, saying it had “crashed the economy and collapsed confidence in Britain’s fiscal strength”.

“Since 2022, we have been paying that Truss penalty as we battle to re-establish belief in Britain and the UK’s fiscal sustainability,” he said.

Giving an overview of his plans for the economy, Mr Healey said the government would extend its reforms of judicial review from energy projects to all major infrastructure programmes.

He said the reforms would mean “vexatious litigation and challenge can’t block economic growth”.

The chancellor also reiterated the government’s commitment to transferring power out of Whitehall, saying he would set out a “roadmap to fiscal devolution” at next month’s Budget.

Ahead of that, he said the British Business Bank would be providing £150 million for fast-growing firms in the North of England and announced the creation of a “Northern 500” group of “the North’s most ambitious mid-sized businesses”, to be led by regional mayors.