Liverpool, ENGLAND — U.K. Finance Minister Rachel Reeves vowed on Monday that Britain will not return to austerity, saying her budget proposals will look to rebuild the country.
"It will be a budget with real ambition ... a budget to deliver the change we promised. A budget to rebuild Britain," she told a crowd of Labour party delegates Monday. "There will be no return to austerity."
Her speech, briefly interrupted by heckles from a protester in the crowd, came as Labour kicked off its annual party conference on Monday — its first in power for 15 years.
The ruling Labour government has faced criticism for generating an atmosphere of doom over the state of the public finances, with Prime Minister Keir Starmer warning of "painful" decisions after the party rallied to victory in the July general election.
Reeves has suggested that taxes are likely to rise at her upcoming Oct. 30 Autumn budget after discovering a £22 billion ($29 billion) "black hole" in the public finances. Her predecessor Jeremy Hunt, from the rival Conservative Party, has denied the claims as "fictitious."
However, the government has announced that millions of pensioners will no longer receive home heating payments in the winter, a decision that Labour supporters have criticized.
Half of Britons, including a quarter of Labour voters (26%), are disappointed with the government's achievements so far, Ipsos opinion polling showed Friday. Gideon Skinner, Ipsos' senior director of U.K. politics, said the findings were an indication that the government's "honeymoon period" was over.
"There's a seeping back of pessimism and concern following a few months of hope after the election," Skinner said earlier Monday at the Labour party conference.
Facing Criticism for Gloomy Outlook
Stressing that there was a “prize” ahead if the fiscal situation could be improved, Reeves insisted there would be no return to austerity – but also refused to rule out some government departments facing real-terms cuts.
Ahead of a speech in which she will also unveil investigations into more than £600m-worth of Covid contracts awarded under the Conservatives, Reeves said many of the problems she faced were because the last government had been “dishonest” over the public finances.
“There won’t be a return to austerity,” she told BBC Radio 4’s Today programme. “There will be real-terms, increases to government spending in this parliament.”
Asked if some departments could nonetheless face real-terms cuts, Reeves did not rule this out. She said: “What I’m saying is there will not be real-terms cuts to government spending, but the detailed department by department spending will be negotiated.”
Before her speech, and before the 30 October budget, at which Reeves will also set out an interim one-year spending settlement, there is concern among some ministers and backbench Labour MPs that the government has over-stressed the fiscal inheritance from the last government, and needs to give grounds for optimism.
Challenged over whether the repeated talk of a £22bn fiscal “black hole” and the prospect of tax rises and constrained spending risked depressing the economy, Reeves said she had no other choice.
“I could have continued that cover-up and just pretended it wasn’t there, or I could be open and honest with people about the scale of the challenge and that the path ahead will be harder and steeper than we had previously anticipated,” she said.
“I think the public get that the reason the Conservatives lost the election is not because the economy was doing well and public services were in great shape.
“People understand that there are difficult choices ahead, but what I’m setting up today in my conference speech is the prize if we can bring stability back to our economy.”
Tough Decisions Ahead
For now, however, Reeves said, there would be some hardship. Refusing to reveal the detail of what might come in October’s budget, she warned of “a number of difficult decisions around tax and spending and welfare”.
Among the choices already made is the removal of the winter fuel allowance from all except the poorest pensioners. Such cuts, Reeves said, were “not changes that I expected to make or wanted to make, but when faced with a situation when there’s a £22bn black hole, not some year in the future, but this year in the public finances, it requires difficult decisions”.
At the party’s conference in Liverpool, the Labour leadership faces a potential defeat in a vote to condemn the winter fuel decision, one led by the Unite and the Communication Workers Union trade unions.
While the unions had hoped the issue could be debated on Monday, it is likely to be moved to Wednesday morning, at the end of the conference, when it might attract less attention.
Reeves’ speech will contain elements of a fightback against recent negative headlines, including the referral of more than half of contracts for material such as masks to the incoming Covid corruption commissioner.
In her speech, the chancellor will say: “Billions of pounds of public money handed out to friends and donors of the Conservative party. Billions more defrauded from the taxpayer.
“So we are delivering on our commitment to appoint a Covid corruption commissioner. It could not be more urgent. And I have put a block on any contract being abandoned or waived until it has been independently assessed by the Covid commissioner.”
Addressing the 'Black Hole'
Since taking office, Chancellor Rachel Reeves has consistently accused the previous Conservative government of having left a £22bn "black hole" in the public's finances.
She says today that figures from Friday "showed another month of record borrowing," and "debt at 100% of GDP".
"Departments had been allocated money which they were spending, but which did not exist," she says of former prime minister Rishi Sunak's government. "The money was not there," she adds, saying that debt could pose risks for "years to come".
She says the Tories were "reckless" and "irresponsible".
Turning her attention to the current Tory leadership race, Reeves says their party's biggest "failure" was not just being "incompetent" or putting "party before country" - but the fact they didn't understand the world as it is today.
They did not understand the premium on economic stability, she adds.
A New Industrial Strategy
The government will launch plans next month for a "new industrial strategy," Rachel Reeves, delivering her first Labour conference speech as chancellor, says.
"The age of trickle down, trickle out economics is over".
This strategy will drive and shape "long term growth," the chancellor goes on, and "unlock investment, create jobs and deliver prosperity."
"Britain is open for business once again."
Reeves shifts now to mention the budget, which is due at the end of October - Labour's first one in 14 years, she says, again to huge applause.
"Because I know how much damage has been done in those years [...] there will be no return to austerity," she promises.
She said the same thing to the BBC's Today programme earlier, when asked by presenter Nick Robinson, and went as far then as promising that "there'll be real terms increases to government spending [overall]".
A 'Changed' Labour Party
An uncomfortable moment for Rachel Reeves, to say the least, as a protester is dragged out of the hall while shouting about arms sales to Israel.
It’s similar to lines that Sir Keir Starmer has used in the past in response to hecklers.
But that tells its own story — in the past few years heckling and protests have become a feature of Labour conferences. The prime minister’s team must now be worried about his big speech tomorrow.
While Reeves moves on to the economy, a protester in the crowd stands up.
He accuses the government of continuing to sell arms to Israel, while the war with Hamas in Gaza continues.
He's swiftly dragged out of the hall and Reeves says Labour is a changed party - not one of protest.
A Commitment to Building a Better Britain
Reflecting on the last year, the chancellor says she stood at the last Labour conference and promised that in 12 months time she would do so again "as the the first ever female Chancellor of the Exchequer".
There's another big round of applause at this moment.
She pays tribute to previous "trailblazing Labour women" and "thousands of women... who broke down barriers" to allow her to get to this position: "It falls to me, and to our generation of Labour women, to follow in the footsteps of those who went before us.
"To write the work of all women back into our economic story. And to show to our daughters and our granddaughters that they need place no ceiling on their ambitions. That is the Britain we're building."
After a big round of applause, Reeves begins her speech by saying that this time last year she made a commitment - listing actions including getting Britain "building again" and repairing the NHS.
After 14 "wasted" years, she says, referring to consecutive Conservative governments, she stands here as chancellor "ready to deliver on that commitment".
"Labour is back in the service of communities we never should have lost."
