There's a moral case to tackle welfare bill, John Healey tells the Left

John Healey pleaded with Labour activists to drop their opposition to welfare reform yesterday – warning there is no money left.

The new Chancellor told the party's conference that Britain could not afford another Left-wing spending spree unless economic growth recovers.

And he told activists there is a 'moral case' for Labour to try and bring the runaway benefits budget under control by getting more young people into work.

Ministers are nervous of welfare reform after a Labour backlash derailed plans last year to trim £5billion from the benefits bill.

Labour aides even circulated a message to activists at the annual conference in Liverpool to 'clap as hard as you can' when the Chancellor 'mentions welfare'.

It resulted in a modest ripple of applause, which an aide to Mr Healey said demonstrated he was 'bringing the party with him' on welfare reform.

But Shadow Chancellor Andrew Griffith said the fact delegates had to be ordered to applaud the idea of reforms was 'proof Labour MPs will never support cutting the out-of-control welfare bill'.

The Chancellor is due to deliver his first Budget next month and gave no clues about which taxes he will raise to fill an estimated £15billion hole in public finances.

John Healey told the Labour Party conference that Britain could not afford another Left-wing spending spree unless economic growth recovers

The Chancellor made a joke about his first Labour conference in 1986 'when he had hair' 

After opening his speech with a joke about his first Labour conference in 1986 'when he had hair', he lavished praise on his predecessor Rachel Reeves and mentor Gordon Brown. 

But he warned the country could not afford a major spending spree, saying: 'The money New Labour had in the 1990s is simply not there now.'

Setting out the case for economic growth, Mr Healey added: 'Labour isn't just here to cut the cake in a different way, we have to bake a bigger cake and make sure that it's fairly shared.

'So whether it's the cost of business or the cost of living, the only long-term answer is growth.'

Labour's plans have been hit by a sharp rise in government borrowing costs, driven by the market's concerns about No10's willingness to get a grip on finances.

Mr Healey said interest charges on Britain's debts top £100billion, exceeding the budgets of the Home Office and the ministries of defence and justice combined.

The Chancellor tried to reassure the markets, saying that fiscal discipline would 'run through the core' of the Budget on October 28.

'These levels of debt are an assault on our common sense, they are an affront to our values,' he said. 'And that's why the Prime Minister and I are in lockstep that we will meet the fiscal rules.'

Pictured: Former Labour prime minister Gordon Brown wearing Mr Healey's tie at the 1999 Labour Party conference 

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The Budget is not expected to include any significant welfare reforms. 

But Mr Healey insisted the Government is committed to implementing reviews of youth unemployment and disability benefits. 

He added: 'It is not progressive to allow a bigger and bigger benefits bill, and a system which offers an income but doesn't offer a future.

'So once again, as a Labour government, it falls to us to act. And this is more than just an economic must. This is a moral duty.'

Mr Healey said he refuses 'to write off a million young people like the Tories have done'.

Announcing a 'downpayment' on the plans, he said mayors will be given £100million to fund a new scheme aimed at getting youngsters into apprenticeships.

The Chancellor also pledged a 'new age of industrialisation', including £6billion towards building floating docks at a submarine base on the Clyde in Scotland.

Liam Sides, director of advisory firm Oxford Economics, said high energy costs, trade barriers and skills shortages were major obstacles to any attempt to reindustrialise the UK. 

'I cannot think of an advanced economy less suited for an industrial resurgence,' he said.

The Shadow Chancellor said Mr Healey's 'new age of British industrialisation looks set to be powered by his own hot air'.

Mr Griffith added: 'He is a month away from his first Budget and failed to say how he was going to tackle our out-of-control welfare bill, increase defence spending to 3 per cent of GDP, scrap Labour's fuel duty hike or put forward a credible plan to get our economy growing and young people into work.'

UK borrowing costs hit a fresh 19-year high just hours after the Chancellor's speech yesterday, with yields on ten-year gilts climbing above 5.44 per cent for the first time since 2007.

They have been caught up in a global sell-off as oil prices continue to rise thanks to the conflict in the Middle East.

Chris Beauchamp, chief market analyst at trading platform IG, said last night: 'This was a speech that went big on rhetoric and was light on specifics, and will do little to arrest the rise in borrowing costs.'

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