British finance minister calls for spending discipline but no return to austerity

Liverpool, ENGLAND — Finance Minister Rachel Reeves vowed Monday that Britain will not return to austerity but said she will make tough choices when she presents her budget proposals next month.

“This will be a budget with real ambition… a budget to deliver the change we promised. A budget to rebuild Britain,” he told a crowd of Labour delegates on Monday. “There will be no return to austerity.”

His opening speech, briefly interrupted by boos from a pro-Palestinian protester in the crowd, came as the Labour Party opened its annual party conference on Monday, its first in power in 15 years.

The ruling Labour government has faced criticism for creating an atmosphere of gloom over the state of public finances, with Prime Minister Keir Starmer warning of “painful” decisions after the party swept to victory in a general election in July.

The U.K.’s national debt now stands at 100% of gross domestic product for the first time since 1961, new data from the Office for National Statistics showed on Friday. In the fiscal year to August, the deficit rose to 64.1 billion pounds ($85.4 billion), 6.2 billion pounds higher than the ONS had forecast in March.

Reeves has suggested taxes are likely to rise in his upcoming autumn budget on October 30 after uncovering a £22 billion ($29 billion) “black hole” in the public finances. His predecessor Jeremy Hunt of the rival Conservative Party has denied the claims as “fictional”.

“I know you’re all eager for change, but because of that legacy inherited by the Conservatives, the road ahead is steeper and more difficult than we expected,” he told the audience on Monday.

Still, Reeves tried to strike a positive tone, saying: “My optimism for Britain shines brighter than ever. My ambition knows no bounds.”

Reeves defended a divisive move earlier this month to cut winter fuel allowances for millions of retirees as the “right decision under the circumstances we inherited.”

However, he reiterated that the government will not raise income tax, National Insurance social security payments, value-added tax (a sales tax) and corporate tax.

Instead, he promised to raise additional revenue by scrapping tax relief for non-UK domiciled people and cracking down on forms of tax evasion and avoidance.

“This government will not sit back and indulge those who do not pay the taxes they owe,” he said.

The finance minister also reaffirmed the government’s position as “proudly pro-business”, referring to plans next month to host a business summit and announce proposals for a new national industrial strategy. That, she said, would include measures to get Britain to its clean energy and net-zero emissions targets by 2030.

He also said the government will continue to seek trade agreements to “open new markets” as negotiations are currently ongoing with important partners such as India.

“After years of instability and uncertainty, Britain is open for business again,” he said.

Failure to act quickly on public spending would “undermine the UK’s fiscal position”, with implications ranging from public services to mortgages and inflation, Reeves warned, invoking memories of former Conservative prime minister Liz Truss’s failed mini-budget.

“Liz Truss’s experiment showed us that any plan for growth without stability leads to ruin,” he said, declaring that “the era of trickle-down, trickle-out economics is over.”

This comes at a time when public enthusiasm for the government has shown signs of waning, less than three months after Labour scored a historic victory over the Conservatives.

Half of Britons, including a quarter of Labour voters (26%), are disappointed with the government’s achievements so far, an Ipsos opinion poll showed on Friday. Gideon Skinner, Ipsos’ director of British politics, said the results were an indication that the government’s “honeymoon period” was over.

“There is a resurgence of pessimism and concern after a few months of hope following the election,” Skinner told the Labour Party conference earlier on Monday.

Tom Selby, director of public policy at financial services firm AJ Bell, said Reeves’ speech was unlikely to have eased concerns about looming fiscal challenges.

“While the chancellor’s tone may have been more positive today, she left the conference in no doubt that painful decisions will be made in the Budget on October 30, although the country remains uncertain exactly where 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 such as pension tax relief and tax-free cash, as well as Capital Gains Tax (CGT),” he added.