Britain's finance minister tries to revive economic optimism after months of gloomy rumours

LIVERPOOL – British Finance Minister Rachel Reeves will promise on Monday that despite the dire state of Britain's public finances, there will be no return to an era of public spending cuts.

Reeves plans to emphasise optimism in a speech to Labour's annual conference, seeking to calm party members nervous despite their recent landslide election victory and reassure them that their first budget next month will not be all doom and gloom.

The party said Reeves, Britain's first female finance minister, would stress: “My optimism for Britain burns brighter than ever.”

Three months after its victory in the British election on July 4, the centre-left party is meeting in the north-west English port city of Liverpool. While the return of the Labour Party after 14 years in opposition has many delegates excited, some are concerned about the government's slow start and pessimistic economic messages.

Prime Minister Keir Starmer won the election on a promise to end years of unrest and scandals among the Conservatives, revive Britain's sluggish economy and restore ailing public services such as the state-funded National Health Service (NHS).

He has since struck a dire tone, claiming the Conservative government has left a £22 billion ($29 billion) “black hole” in the public finances and warning that “things will get worse” before they get better, leaving many party members worried that the October 30 budget will include tax hikes and spending cuts.

Reeves plans to declare that there will be “no return to austerity” and stress that the government will invest to reverse the decline in “growth, productivity and family incomes,” according to excerpts released in advance by the party.

“Conservative austerity has been a destructive decision for our public services – and also for investment and growth,” says Reeves of the spending cuts imposed by previous governments after the 2008 global financial crisis. “We have to confront the Tories' legacy and that means tough choices. But we will not allow that to cloud our ambitions for Britain.”

Reeves will set out how the government plans to partially plug the fiscal hole without raising income, sales or corporation tax, all of which it has ruled out. Measures include a crackdown on tax evaders and an attempt to claw back money obtained through contracts signed during the COVID-19 pandemic.

There is also controversy over the government's announcement that it will cut payments to millions of pensioners to help them heat their homes in winter.

Trade unions, which are among Labour's donors and allies, are hoping that conference delegates will secure a vote against the decision to scrap the winter heating oil subsidy, which is between £200 and £300 ($262 and $393), for all but the poorest pensioners. The result would not be binding but would increase pressure on the government over the unpopular new policy.

The mood in the party was further dampened by a storm of indignation over Starmer's acceptance of free services at a time when millions of people are struggling to cover their living costs.

Starmer insists he followed the rules when he accepted thousands of pounds (dollars) worth of clothes and designer glasses from Waheed Alli, a media entrepreneur and Labour donor. But after days of negative headlines, the party says Starmer will not accept any more free outfits. The same goes for Reeves or Deputy Prime Minister Angela Rayner, both of whom also received clothing donations.

Starmer will seek to change the subject and mobilise Labour's troops in his speech to the autumn conference on Tuesday. The autumn conference will be a mixture of pep rally, political forum and drinking session, playing a key role in maintaining morale among party activists.

He will point to the government's early actions, including ending a wave of public sector strikes, as well as plans to take state control of the railways, set up a state-owned green energy company, introduce stricter rules on water companies that discharge wastewater, and strengthen the rights of workers and tenants.

Last year's Labour conference was brimming with optimism as the party, which had previously lost four elections in a row, sensed that power was within reach. While the mood will be more subdued this year, it is likely to be more optimistic than next week's meeting of the Conservatives, who suffered their worst ever election defeat in July.

The Conservative Party conference in Birmingham, central England, will be marked by the battle to succeed former Prime Minister Rishi Sunak as party leader, as well as internal disputes over a return to power.