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UK's Reeves rules out return to 'austerity' with more upbeat economic message

Reeves says spending will grow over course of government

British finance minister Rachel Reeves ruled out a "return to austerity" on Monday, trying to brighten the gloomy tone her party has adopted since its landslide election victory in July.

Labour had been dampening expectations by repeatedly telling Britons that the outgoing Conservatives, who imposed a radical "austerity" programme of cutbacks in response to the 2008 financial crisis, had left a yawning gap in public finances, and hinting at spending cuts ahead.

Instead, speaking to the party's annual conference, Reeves painted a picture - long on hope but short on detail - of a Britain richer from investment in manufacturing and services, where work paid a decent wage and new generations could thrive.

But she gave no timeframe for when Britain could see the kind of growth and new jobs she described, and again said she would have to take more tough decisions like her much-criticised one to cut winter fuel payments for pensioners.

Reeves told a packed conference hall in the northern English city of Liverpool: "There will be no return to austerity. Conservative austerity was a destructive choice for our public services - and for investment and growth too."

"We must deal with the Tory (Conservative) legacy and that means tough decisions. But we won't let that dim our ambition for Britain."

She justified the cut in fuel payments by listing what she said were the failings of the previous government, including a 22 billion pound ($29 billion) hole in the public finances.

"I know that not everyone in this hall or in the country will agree with every decision that I make. I will not duck those decisions: not for political expediency, not for personal advantage," she said.

"So believe me when I say: My optimism for Britain burns brighter than ever. My ambition knows no limits because I can see the prize on offer, if we make the right choices now," she added, announcing the launch of free breakfast clubs for primary school children.

Her more optimistic message seemed to be aimed at improving the mood at a time when the government has been under pressure to explain why ministers accepted donations for clothes.

A survey last week indicating consumer confidence had plunged has led to accusations that Reeves and Prime Minister Keir Starmer are actually damaging the economy with an overly gloomy view.

Difficult choices

Reeves said not returning to austerity meant that, despite some tough decisions, there would be growth in overall public spending under Labour.

She again said the government would not raise income tax, National Insurance social security payments, value-added tax or corporation tax.

But she said political stability was key to attracting the business investment Britain needed and that, with government debt at 930 of economic output, companies would have to contribute more.

In a sign of the challenges ahead, English National Health Service nurses voted on Monday to reject a government pay award for 2024/25.

Reeves said the government would try to claw back money by appointing a COVID corruption commissioner to investigate more than 650 million pounds of pandemic contracts awarded by the previous government in what it said were exceptional circumstances.

Critics say it awarded deals to friends and favourites, sometimes for personal protection equipment that turned out to be unusable.