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."

by Andrew Grice, Independent continues