Hutton's call to 'celebrate' millionaires receives an icy response from the TUC

The Labour Party should accept that Britain needs more rather than fewer millionaires, the Business Secretary John Hutton has declared.

Mr Hutton, a prominent Blairite, sparked a debate about Labour's future direction by urging the party not to attack huge salaries and bonuses in the City. "Rather than questioning whether high salaries are morally justified, we should celebrate the fact that people can be enormously successful in this country," he said. "Rather than placing a cap on that success, we should be questioning why it is not available to more people."

Mr Hutton's remarks will be seen as an attempt to rebuild bridges with the City, which has turned against the Government over its plans to target foreign residents who enjoy "non-domicile" status and to reform capital gains tax.

His views about high salaries are not shared by all his cabinet colleagues. Alistair Darling, the Chancellor, has called on company bosses to behave responsibly. He said last month: "Corporates – whether they're a water company or a bank – need to pass 'the next-door neighbour test'. If you're leaning over the fence talking to your next-door neighbour, can you justify what you've done?"

Mr Hutton's views are closer to those of Tony Blair, who once said "it's not a burning ambition for me to make sure that David Beckham earns less money", and Peter Mandelson, who said New Labour was "intensely relaxed about people getting filthy rich".

But many Labour MPs are disappointed by figures suggesting that social mobility has not improved since 1997 and are alarmed that the Government may miss its target to halve child poverty by 2010.

Giving the annual lecture to the Progress group of Labour modernisers last night, Mr Hutton said: "It would be a good thing for our country if there were more millionaires in Britain not fewer. Our overarching goal that no one should get left behind must not become translated into a stultifying sense that no one should be allowed to get too far ahead."

He rejected calls that Labour should change course from the path set during the Blair era. But he admitted that the party's long-running debate over whether it should aim for "equality of outcome" and "equality of opportunity" had still not been settled.

Mr Hutton said: "There are still many who say they are definitely in favour of equality of opportunity – but what they mean is the opportunity to advance only to a certain level. Get too successful, too rich, and you need to be held back for the good of society. A key challenge for New Labour over the coming years is to recognise that, far from strengthening social justice, a version of equality that only gives you the opportunity to climb so far actually subverts the values we should be representing. Instead, any progressive party worth its name must enthusiastically advocate empowering people to climb without limits, free from any barrier holding them back – be it background, gender or outdated social attitudes."

The Business Secretary argued that New Labour must "renew our commitment to wealth creation and enterprise in Britain and to champion an increase in individual aspiration among the British people".

But Brendan Barber, TUC general secretary, dismissed Mr Hutton's speech as "out-of-touch". He said: "No one objects to proper rewards for risk-taking, innovation and major responsibility and some will always earn more than others. We look to ministers to stimulate debate about the absence of any link between company success and boardroom pay, not to celebrate it. The growth of a free-floating group of the super-rich harms social cohesion and threatens inflation."

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