Rachel Reeves has acknowledged the difficult economic choices facing the government, pledging fiscal responsibility and caution with public funds.
In her address at Labour’s annual conference in Liverpool, the Shadow Chancellor committed to maintaining “taxes, inflation and interest rates as low as possible.”
However, hinting at potential tax adjustments in the upcoming November Budget, she attributed the government’s constrained position to international developments and “long-term damage” inflicted upon the economy.
Reeves faces a challenging Budget, with economic analysts suggesting that tax increases or spending reductions may be necessary to meet her self-imposed borrowing targets.
When questioned on the possibility of tax hikes in a pre-speech BBC interview, Reeves emphasized that “the world has changed” in the past year, citing conflicts in Europe and the Middle East, US tariffs, and escalating global borrowing costs.
“We’re not immune to any of those things,” she stated.
Should tax increases be implemented in the Budget, this sets the stage for the government to justify their necessity.
Reeves also criticized past Conservative administrations, singling out Liz Truss for causing mortgage costs to “spiral” with her mini-budget.
In remarks perceived as a veiled critique of Greater Manchester’s Labour mayor, Andy Burnham, Reeves stated, “There are still those who peddle the idea that we could just abandon economic responsibility and cast off any constraints on spending.”
“They are wrong – dangerously so – and we need to be honest about what that choice would mean.”
Burnham has continued his vocal criticism of Sir Keir Starmer during Labour’s conference and has not ruled out a leadership bid.
However, he prompted a backlash from some Labour MPs after he suggested ministers were “in hock to the bond markets” – a reference to the government’s self-imposed rules limiting spending and borrowing.
Despite dismissing the Tories as an “irrelevance,” Reeves reiterated the message: “Don’t ever let anyone tell you that there’s no difference between a Labour government and a Conservative government.”
Urging Labour activists to take “pride in what we are achieving,” she outlined key party pledges, including the recruitment of additional local police officers and the establishment of school breakfast programs.
The Shadow Chancellor has faced a challenging period, marked by a temporary increase in government borrowing costs in July following a tearful appearance in the Commons, fueling speculation regarding her job security.
Simultaneously, Reeves is under pressure from certain Labour MPs to increase spending, with numerous voices advocating for the removal of the two-child benefit cap.
Ministers have suggested the possibility of lifting the cap in the Budget – a measure estimated to cost £3.5bn annually.
In June, the government also abandoned proposals to cut nearly £5bn from the benefits bill, following a significant rebellion from within its own ranks.
However, attendees at her conference speech appeared resolute in their support for the Shadow Chancellor, offering a standing ovation upon her arrival and again when she addressed a protester who interrupted her speech with a Palestinian flag.
Reeves responded to the protester: “We understand your cause and we are recognising a Palestinian state. But we are now a party in government, not a party of protest.”
Reeves also used her speech to criticize Reform UK, which has been topping opinion polls for several months, despite having only five MPs.
Labour has stepped up its attacks on the party at its conference.
“The single greatest threat to the way of life and to the living standards of working people is the agenda of Nigel Farage and the Reform Party,” the chancellor said.
“Whatever falsehoods they push, whatever easy answers they peddle, however willing they are to tear communities and families apart, they are not on the side of working people.”
Delivered two months ahead of the Budget, Reeves’s speech was comparatively light on specific policies.
She did confirm that young people who have been out of a job or education and receiving Universal Credit for 18 months will be offered a guaranteed paid work placement, as part of plans to tackle youth unemployment.
Those who refuse to take up the offer without a reasonable excuse will face sanctions such as losing their benefits.
Other announcements included:
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