Rachel Reeves said she would not apologise for the Budget but insisted she would like to see taxes come down.
The Chancellor said she was “absolutely” relaxed about wealth creation and said the Government wanted to attract the “highest-skilled” immigrants to the UK despite plans to crack down on the overall number of arrivals.
Ms Reeves, who announced £40 billion of tax hikes in her first Budget, said she would like to bring the overall burden down but she could not yet afford to do so and “I’m not going to make promises that I can’t keep”.
The Chancellor was speaking at a Bloomberg event in Davos, Switzerland, where the World Economic Forum has attracted business leaders from around the globe.
She has endured a bruising start to 2025, with government borrowing costs and the value of the pound buffeted by market turbulence, weak growth figures and concerns among business leaders about the year ahead.
But the Chancellor said: “I’m not going to apologise for the Budget, because although I hear criticism, what I don’t hear is any real alternatives.
“If you’re a CEO or a CFO and you’re coming into a new business, and you’ve got these massive problems with your finances, you have to stabilise them and that requires difficult decisions, but if you don’t make those decisions, you’re going to be plagued by them for years to come.
“So, we have now wiped the slate clean. Businesses can be confident of that.
“My instinct is to have lower taxes, less regulation, make it easier for businesses to do business.
“But unless you can have that economic and fiscal stability, then, to be honest, I think that you’re not going to have any serious plan for economic growth.”
Ms Reeves said achieving growth and reducing the cost of the state could allow her ease the burden, but she could not do that yet.
She added: “I would like taxes to be lower on people and on businesses, but I’m not going to play fast and loose with the public finances because, in the end, you actually don’t result in anyone being better off, because it sends interest rates soaring if you lose control of the public finances.
“So, I’m not going down that route. But if we can run the state better, we can run public services better, we can bring investment into the UK and grow the economy, we don’t have to keep ratcheting up taxes to make the sums add up.
“That’s where I would like to be. We’re not in that place yet.”
The Government’s plan for the economy has got off to a rocky start, with the prospect of official figures next month showing little to no growth in the first six months of Labour’s administration.
But Ms Reeves said: “We’re reforming the planning system, we’re reforming our regulatory system, reforming pensions, and also this year we’re going to be publishing an immigration white paper, and although we know that we need to bring immigration down, particularly illegal immigration into the UK, we are going to look again at routes for the highest-skilled people, visas particularly in areas like AI and life sciences, because Britain is open for business.
“We are open for talent. We’ve got some of the best universities, some of the best entrepreneurs in the world, but we also want to bring in global talent into Britain.”
Asked if she was relaxed about wealth creation, she said: “Absolutely. We want … the best talent, the best people to come to Britain, create jobs in Britain, to grow our economy.”
The challenges for the UK could be exacerbated if new US President Donald Trump hikes tariffs to protect American businesses.
Business and Trade Secretary Jonathan Reynolds, appearing alongside Ms Reeves, said: “We understand there is a genuine analysis in the US that feels that the very big trade deficit in goods that the US has both with the EU and with China, the sense of unfairness that that is the root point of – we understand that, we might disagree, but we’ll engage with that.”
He said the US did not have the same trade deficit on manufactured goods with the UK that it does with the EU bloc and China, “so there’s the basis for a conversation” with Washington.
“But it will be a choppy time to be a trade minister, there’s no doubt about that, but our job is to navigate through that,“ he said.
“You don’t get to pick the world as you want it to be. You get the world as it is.”
Speaking to broadcasters later, the Chancellor suggested the UK would be a better position in relation to potential tariffs than countries that export more than they import, saying Britain has a “trade deficit” with America.
She said she would be seeking to meet her US counterpart “as soon as possible” to talk about economic partnership between the two nations as part of efforts to “get a good deal for Britain”.
“When my opposite number, Scott Bessent, is confirmed, I hope to meet him as soon as possible to talk to him about how we can work together to grow both our economies, improve our trade, and indeed improve our economic security,” Ms Reeves told Sky News.
She added: “The UK has a trade deficit with the United States. President Trump is concerned about the trade surpluses that countries around the world are running with the United States.
“That’s not the case for the UK, and so we will work with the Trump administration to get a good deal for Britain and make the case as well for the continuation of that strong trade and investment relationship between our two great countries.”
Asked what her expectations for 2025 were, she said: “I’m optimistic.”
