By In her first major speech since becoming the UK’s first female finance minister, Rachel Reeves has made it clear that Britain will not return to an era of austerity, despite the growing concerns over the state of the country’s finances.
Speaking at the Labour Party’s annual conference in Liverpool, Reeves emphasized that her upcoming budget will aim to rebuild the country, restore optimism, and steer away from public spending cuts.
This comes at a critical time for the Labour government, which, just months after a landslide election victory, is grappling with a £22 billion ($29 billion) hole in the public finances and rising anxiety among voters and party members alike.
Tory austerity destroyed public services, investment and growth.
Fixing their mess means tough decisions.
But we won’t let that dim our ambition for Britain.
“There will be no return to austerity,” Reeves declared to the crowd of Labour delegates, amid a brief interruption by a protester.
“It will be a budget with real ambition, a budget to deliver the change we promised. A budget to rebuild Britain.”
Reeves’ speech was delivered just three months after Labour’s triumphant return to office, but concerns over the country’s economic outlook have dampened the initial euphoria, with Prime Minister Keir Starmer warning of “painful” decisions ahead.
Reeves’ pledge to avoid austerity measures comes at a time when the UK is struggling to manage its public finances, with the newly-elected Labour government facing criticism for its handling of the economy.
A recent Ipsos poll revealed that 50% of Britons, including a quarter of Labour supporters, are disappointed with the government’s achievements so far, highlighting growing unease about the direction of policy.
Budget on October 30: what to expect
Although Reeves has ruled out increasing income tax, National Insurance, VAT, and corporate tax, she has not dismissed the possibility of other tax rises as she prepares to unveil her budget on October 30.
This has fueled speculation about where cuts or adjustments may be made, particularly after the government announced it would end home heating payments for millions of pensioners, a move that has been criticized by Labour supporters.
The chancellor’s budget will be critical in shaping the future economic landscape of Britain.
Reeves must strike a delicate balance between addressing the nation’s financial difficulties and maintaining public confidence in Labour’s ability to deliver on its promises.
‘My optimism for Britain burns as bright as it ever has’
Reeves is keen to reassure voters that the government remains optimistic despite the challenging financial environment.
“My optimism for Britain burns as bright as it ever has,” she told party delegates, attempting to calm jitters among Labour supporters.
As part of her strategy to boost confidence, Reeves plans to deliver a budget that focuses on long-term growth and investment in essential sectors, signalling that while tough decisions are inevitable, the government remains committed to securing a brighter future for the country.
However, the financial turmoil has left many questioning whether Labour can follow through on its promises without resorting to spending cuts.
Former Chancellor Jeremy Hunt, a Conservative, has accused Reeves of exaggerating the scale of the budget shortfall, describing her claims of a £22 billion black hole as “fictitious.”
The Conservative opposition has been quick to seize on this narrative, further heightening the pressure on Reeves and her team to prove that they can effectively manage the country’s finances without reverting to austerity.
Productivity concerns and remote work debate
One of the critical issues Reeves has raised in her role as chancellor is the need to improve the country’s productivity.
In a recent interview with LBC radio, Reeves suggested that remote working could hinder the UK’s ability to boost productivity, striking a different tone from other ministers in the Labour government, who have expressed support for flexible working arrangements.
Britain has experienced a significant slowdown in growth in output per hour worked since the 2008 financial crisis, a trend that worsened during the COVID-19 pandemic.
While economists agree that higher productivity is essential for improving living standards over the long term, the debate over whether working from home has helped or hindered productivity remains unresolved.
“I am all for being flexible and ensuring that people can balance work and family life,” Reeves said.
“But I do think that productivity gains are more likely to happen when there’s a sharing of ideas and collaboration in person.”
Reeves pointed to her own experience as an example, noting that her team’s work over the weekend was more effective due to in-person collaboration.
“Working in the office allowed my officials to share ideas more freely, and that boosted our efficiency,” she added, implying that more frequent in-office collaboration might be necessary to meet productivity goals.
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