UK Chancellor Rachel Reeves Pledges No Return to Austerity

UK Chancellor of the Exchequer Rachel Reeves is set to reassure the Labour Party’s annual conference that the current government will not return to “austerity” or make large spending cuts.

Reeves plans to emphasize optimism in her speech, aiming to alleviate concerns among Labour members despite the party’s election victory. This may indicate that her first budget after taking office will not be entirely pessimistic.

Following the Labour Party’s general election win in July, Reeves revealed a £20 billion (US$29 billion) hole in the UK’s public finances, left by the previous Conservative government. She hinted that the fiscal budget decision announced on October 30 might be harsh, including tax increases aimed at consolidating the economic foundation.

Reeves has committed to sticking to Labour’s election promise not to increase income tax, social security, national insurance contributions, VAT, and corporation tax.

The government has proposed saving money by cutting winter heating subsidies for tens of millions of pensioners. However, this proposal has been met with criticism from trade unions and other traditional Labour Party supporters. The bill was eventually rejected by the House of Commons earlier this month.

No Return to Austerity

According to the speech excerpt, Reeves will tell the Labour Party conference that the necessary decisions will be made to achieve stability, which is “the fundamental premise for business confidence to invest and families to plan for the future.” She will emphasize that the government will invest to reverse the decline in “economic growth, productivity, and household income.”

The speech excerpt also reads, “This government will not return to austerity. Conservative austerity is a destructive choice for our public services – for investment and growth as well… We must deal with the mess the Conservatives left behind. But we will not let this undermine our ambitions for Britain.”

Reeves is expected to outline how the administration hopes to fill some of the fiscal black hole without raising income, sales, and corporate taxes. This may include cracking down on tax evaders and recovering funds defrauded from contracts signed during the coronavirus pandemic.

Additionally, the government may consider raising capital gains tax to bring it into line with income tax. Under the current tax system, the UK capital gains tax rate is as high as 28%, while income tax rates can reach as high as 45%.