Liverpool, ENGLAND — U.K. Finance Minister Rachel Reeves vowed on Monday that Britain will not return to austerity, but said she would make hard choices as she lays out budget proposals next month.
“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 keynote speech, briefly interrupted by heckles from a pro-Palestinian 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.
U.K. national debt is currently running at 100% of gross domestic product for the first time since 1961, fresh data from the Office for National Statistics showed Friday. In the financial year to August, the deficit totalled £64.1 billion ($85.4 billion) — £6.2 billion more than the ONS forecast in March.
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.”
“I know that you are impatient for change. But because of that legacy inherited by the Conservatives, the road ahead is steeper and harder than we expected,” she told the audience Monday.
Still, Reeves sought to strike a tone of positivity, saying “my optimism for Britain burns brighter than ever. My ambition knows no limits.”
Reeves defended a divisive move earlier this month to cut winter fuel allowances for millions of pensioners as the “right decision in the circumstances we inherited.”
However, she reiterated that the government would not raise income tax, the National Insurance social security payments, value-added tax (a sales levy) and corporation tax.
Instead, she vowed to raise additional revenues by eradicating the U.K.’s non-dom tax concession and clamping down on forms of tax avoidance and tax evasion.
“This government will not sit back and indulge those who do not pay the taxes they owe,” she said.
The finance minister also restated the government’s position as “proudly pro-business,” referencing plans next month to host a business summit and announce proposals for a new national industrial strategy. That, she said, would include measures for Britain to reach its net zero and clean energy goals by 2030.
Additionally, she said that the government would continue to pursue trade deals to “open up new markets,” as negotiations currently remain underway with major partners such as India.
“After years of instability and uncertainty, Britain is open for business once again,” she said.
Failure to act quickly on government spending would “undermine the U.K.’s fiscal position,” with implications ranging from public services to mortgages and inflation, Reeves warned, invoking memories of former Conservative Prime Minister Liz Truss’ failed mini-Budget.
“The Liz Truss experiment showed us that any plan for growth without stability leads to ruin,” she said, declaring that the “era of trickle down, trickle out economics is over.”
It comes as public enthusiasm for the government has shown signs of waning, less than three months after the Labour Party secured an historic victory over the Tories.
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.
Tom Selby, director of public policy at financial services firm AJ Bell, said Reeves’ speech was unlikely to have allayed concerns over the fiscal challenges ahead.
“While the chancellor’s tone may have been more positive today, she left the conference in no doubt that painful decisions are coming in the Budget on 30 October – although the country remains in the dark on where exactly the axe will fall,” he said in a note.
“Like nature, politics abhors a vacuum, and the lack of clarity has led to inevitable speculation about possible revenue-raising reforms to pension tax relief and tax-free cash, as well as Capital Gains Tax (CGT),” he added.