Lord Richard Walker, the Iceland boss who advised the Sir Keir Starmer government on the cost of living, has called on Andy Burnham and John Healey to unleash “aggressive” tax reform to encourage firms to invest and hire more young people. 

In a paper for the Blairite think tank Progress, Walker made a series of bold demands ahead of the Budget despite recognising the Chancellor had “little fiscal headroom”. 

The cheap supermarket chief executive said the government should extend employers’ national insurance contributions reliefs to all under 25-year-olds and review Rachel Reeves’ £25bn tax hike in 2024 so that it “does less to discourage hiring people moving off benefits”. 

Sources told that Healey was considering easing business costs for employers hiring young people out of employment, education and training, who are referred to as ‘Neets’. 

Burnham said on Wednesday he did not want “anybody in their 20s on benefits in this country” after official figures showed the number of Neets was hovering around the 1m mark. The Alan Milburn review on youth unemployment and inactivity rates is expected to be published after the Budget.

Richard Walker riles against tax trap

In his paper for Progress, Walker also called on Healey to use tax reforms “more aggressively to reward genuinely additional investment”. 

Praising former Jeremy Hunt’s introduction to allow businesses to take up full expensing for investments in plant and machinery, Walker said the government should consider adding tax incentives on workforce training. 

He also suggested corporation taxes should be tiered for different companies depending on the size of profit above £250,000. The Iceland chief said “aggressive breaks” should be offered to firms who re-invest funds while, over time, stamp duty should be replaced with “a better-designed property tax”.

The £100,000 salary trap stopping parents from claiming free childcare and paying a higher rate of tax was also described in the short report as a “damaging” cliff-edge that “discourages career progression”.

Walker’s list of demands to Healey followed praise for the government’s decision to approve gas drilling in the North Sea, a decision to rule out capital gains tax hikes and a push to reform the triple lock pension after the next election.

Since leaving his role as the government’s “cost of living champion”, the top supermarket boss and former Conservative Party donor has become more vocal on issues such as business taxes. He also warned that Ed Miliband would be a “disaster” if he became Chancellor before Healey was given the role. 

Top industry groups have called for the government to cut taxes for employers in order to curb youth unemployment. 

Healey is expected to raise taxes on banking profits next week in order to raise extra revenue. A limited amount of fiscal headroom, which is estimated at around £12bn, is set to narrow the scope for significant spending increases or tax cuts. 

The Treasury was approached for comment.