Rachel Reeves to rule out return to austerity after gloomy rhetoric draws criticism

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UK Chancellor Rachel Reeves will attempt to respond to accusations on Monday that she has been speaking negatively about the economy. During her address at the Labour party conference, she will declare that there will be “no going back to austerity” and emphasize that her upcoming Budget will demonstrate “genuine ambition.”

Reeves and Prime Minister Sir Keir Starmer have been criticized for fostering a feeling of economic negativity. They have raised alarms about the troubling state of public finances and the likelihood of a difficult Budget next month, which has contributed to a significant drop in consumer confidence in September.

Last week, Andy Haldane, who used to be the chief economist at the Bank of England, mentioned that the government has created an atmosphere of “fear and unease.” A representative from a major bank commented, “They’re having a tough time getting out of the pit of despair they’ve landed in.”

Data released on Monday regarding private sector activity indicated a slowdown in both manufacturing and services. The S&P Global Flash UK PMI survey dropped to 52.9 in September, down from 53.8 in August and falling short of the predicted 53.5.

Over 500 business leaders are paying £3,000 each to join a "business day" at the party conference in Liverpool on Monday. In her address to party members, Reeves will attempt to convey a vision of a more optimistic future for the UK.

"I remain as optimistic about Britain as I've ever been," she will express. "I can clearly envision the opportunities ahead of us if we make wise decisions at this moment. Stability is the essential groundwork for achieving all our goals."

In her Budget announcement on October 30, Reeves cautioned that tax increases may be on the horizon, stating that "a growth strategy that lacks stability will inevitably result in disaster."

However, she will inform Labour members: “We will not go back to austerity measures. The austerity imposed by the Conservatives was a harmful decision that negatively affected our public services as well as investment and economic growth.”

In an interview with the BBC's Today program on Monday, she assured that there would be genuine increases in government spending during this parliamentary session. However, she emphasized that "the only sustainable way to support public services is by expanding the economy."

Her more positive message aims to boost morale at a Labour conference that has been clouded by internal disputes within Number 10, as well as a debate about the “freebies” given to Starmer and other ministers. Additionally, there is criticism surrounding the government’s choice to reduce winter fuel payments for 10 million pensioners.

Applause erupted at the conference on Monday in response to the party's choice to delay the vote on reducing fuel payments until after Reeves and Starmer have had their say.

The chancellor and prime minister will seek to reassure business leaders in the UK that they remain supportive of them, even though there are worries among companies about the government’s negative outlook on public finances, new employee rights, and potential tax increases.

Tickets for the conference's business day were completely gone within a day, despite the fact that the prices increased significantly from around £2,100 for the same event when the party was in opposition last year.

Starmer, Reeves, and business secretary Jonathan Reynolds, who sought the support of corporate leaders ahead of the election, are now encountering growing doubts from certain business executives.

According to the chair of one of the top 10 most valuable companies in the FTSE, Labour's approach has appeared to focus on promoting growth while simultaneously weakening all the factors that contribute to it, as reported by the Financial Times.

Some have expressed dissatisfaction with the choice to host a global investment summit on October 14, aimed at promoting Britain as a prime location for investment, especially since decisions regarding business taxes in the Budget have not yet been finalized. Additionally, a new investment minister has not been named.

Business leaders are optimistic that Labour will provide political and economic stability following a turbulent time marked by frequent prime ministerial changes under the Conservative party. However, some are starting to worry about the absence of constructive actions from the government since it took office on July 4.

According to Labour, this year's business day event, which has sponsors like HSBC, Mastercard, and Intuit, has significantly expanded compared to last year's gathering. Over 100 executives and board chairs are participating, featuring notable attendees from firms such as Blackstone, Santander UK, Uber, and Shell.

However, one experienced lobbyist pointed out that the cost of a single business day ticket had risen so much that it wasn't worth going anymore. Another lobbyist quipped that their organization had only purchased one ticket, meaning the CEO would have to handle their own note-taking.

On Monday, Reeves will deliver a speech to announce the details of a new industrial strategy. She will focus on showcasing the key sectors that she believes offer the greatest potential for expansion to global investors.

She plans to initiate conversations about the policy by releasing a green paper around the time of the Budget. However, the chancellor will indicate that the final policy won't be ready until next spring.

Reynolds informed the Financial Times prior to the Labour conference that he aimed to announce the chairperson of a new industrial strategy council before the investment summit in October.

The business day gathering will provide an opportunity for business leaders to speak with Starmer about their concerns regarding what they perceive as overly strict regulations in the labor market. They will also address potential increases in taxes on businesses, besides the corporation tax, which Labour has pledged not to raise.

Many individuals are especially worried about the potential increases in capital gains tax or the elimination of tax reliefs that enable owners of private businesses or shares in AIM-listed companies to sidestep this tax.

Reeves plans to hire a new "Covid corruption commissioner" to look into over £600 million in personal protective equipment contracts that were given out during the previous Conservative government. This move comes as Labour aims to shift attention away from the controversy surrounding free clothing provided to high-ranking ministers.

Further contributions by Valentina Romei.