The chancellor has given an upbeat view of the state of the UK economy ahead of next month’s Budget, building on a recent uptick in consumer and business confidence.
In a speech on Monday in Coventry, John Healey spoke of a “new story” of the economy not just turning a corner but being resilient, optimistic and “ready to seize the opportunities of new technologies and ideas”.
But nearby, Jaguar Land Rover announced it would cut 4,000 jobs to save costs following competition from China for cheap cars, US tariffs on UK vehicles and the after effects of a cyber attack.
Healey is also facing concerns about government borrowing costs and the inflationary impact of the Iran war.
Speaking at the Manufacturing Technology Centre in the Midlands, Healey unveiled a £150m fund for companies in the north of England, part of a wider plan to spread economic growth around the UK.
The Conservatives said Healey’s plans would “do little to comfort hard-working families and businesses”.
Healey detailed plans to use public investment to “unlock private investment, to support our innovation economy, and to create the new jobs their areas need”.
The fund, from money already allocated to the British Business Bank, will provide investments of between £5m and £15m to the “most innovative and fast-growing firms”.
It is expected to back university spin-outs and other “ambitious businesses” across the north.
Describing a country “turning the corner”, the chancellor said: “The prime minister laid out a clear diagnosis of what has gone wrong in the past. The solution is a fundamental shift that starts with putting power in the right places.
“The next chapter of Britain’s growth story will be written in more places.”
Recent ructions in government debt markets have made constrained public finances worse, with the Treasury needing to fill possible multi-billion pound gaps caused by rising borrowing costs, and the need to fund higher defence spending.
As he prepares to deliver his Budget on 28 October, the chancellor has said he is as committed to balancing the books as his predecessor, Rachel Reeves.
Healey acknowledged that borrowing costs in the UK are “too high”, piling pressure on the public finances ahead of the Budget. But he promised a focus on economic growth and sunnier times ahead – steering clear of any big pre-Budget warnings on higher taxes or spending cuts.
His tone contrasted with former Prime Minister Sir Keir Starmer, who was accused of talking down the UK economy after Labour won the election when he warned the government would have to make “difficult decisions” to boost growth and “fix” the country’s finances.
Helen Miller, director of the Institute for Fiscal Studies, said: “Economic growth in every postcode sounds great and is something we would all love. I think it’ll actually be much harder to achieve in practice.”
She said it would be easier to see how the government could make stronger second and third cities than to see “how it would drive growth in literally every postcode”, as Prime Minister Andy Burnham has promised.
During his first Prime Minister’s Questions on Wednesday, Burnham faced scrutiny over rising UK borrowing costs.
Conservative leader Kemi Badenoch urged him to say how he would deal with the UK’s increasing debt, after the cost of borrowing for the UK reached a new 18-year high.
Burnham blamed the previous Tory administration, and said his government would be “grounded in fiscal responsibility”.
Following the recent volatility in financial markets, Rupert Harrison, senior adviser at bond giant Pimco and former chief of staff to Tory chancellor George Osborne, said the UK was being treated as “guilty until proven innocent” in terms of fiscal responsibility.
He told the BBC’s Today programme that the UK used to have a lot of credibility with bond markets for managing to “get its house back in order when things go wrong”.
But he said the country had lost credibility in recent years due, in part, to former Prime Minister Liz Truss’s mini-Budget, governments choosing to defer deficit reduction, and UK inflation remaining above the Bank of England’s 2% target since the pandemic.
Shadow chancellor Andrew Griffith said Healey’s plan would do “little to comfort hard-working families and businesses across the country who are worried about more tax rises or the fact that government borrowing rates are near a 28-year high”.
He added: “We are facing serious threats from Russia and Iran on our doorstep, as well as threats to the Falkland Islands.
“Yet the chancellor, the man who resigned over defence spending, seemingly does not want to mention our armed forces or how we will reach 3% of GDP on defence.”
Liberal Democrat deputy leader Daisy Cooper said: “Re-announcing £150m across the entire north of England will barely shift the dial on growth.”
Robert Jenrick, Reform UK’s economic spokesman, said: “Days after a market meltdown, when grip and direction are required, John Healey has revealed himself to be an empty vessel with no idea about how to rescue our economy.”
