Rachel Reeves sticks to script and saves big changes for next month’s budget

Rachel Reeves had a difficult balancing act. Between offering up a message of optimism for Britain as a chancellor elected on a platform of change in July’s election landslide, and holding back the big news for next month’s budget.

Facing criticism that she may have overcooked a doom and gloom-laden approach emanating from the economy, paving the way for a “painful” tax and spending event on 30 October, Reeves’s speech in Liverpool on Monday was an opportunity for a reset.

As the first Labour chancellor in 15 years to address the party conference, she argued there were plenty of reasons to be cheerful: there would be “no return to austerity”, above-inflation pay rises for public sector workers and free breakfast clubs for primary school children.

But, for the large part, there were no big new announcements, as she stuck to the script that – when all is revealed in the budget next month – “tough decisions” would still play a big role in her tax and spending event. This was not the pivot away from the doom-mongering her critics were looking for.

Talking up the contrast between a “changed Labour party” and Liz Truss, the chancellor argued voters had supported the party in such large numbers as they had decided Labour could be trusted with their money. And that trust needed to be maintained.

Fiscal stability remained paramount, with warnings immediate action had been required to fill the £22bn “hole” in the public finances Reeves claims Labour has inherited from the Conservatives. This included a defence of her decision to scrap winter fuel payments for all but the poorest pensioners – a controversial move among the Labour rank and file.

“I will not duck those decisions,” she said.

There were also hints of further changes to come. While she reiterated manifesto commitments not to raise taxes on “working people” through income tax, VAT, and national insurance, she warned “tough decisions” would still be needed, while borrowing to finance change would still be constrained by the government’s self-imposed fiscal rules.

But while the chancellor insisted “every choice would be made within a framework of economic and fiscal stability”, she also argued the culture of the Treasury was changing on her watch to favour investment, in a possible hint of more announcements to come in the budget.

Despite sticking to the gloomy script, Reeves also argued a serious “prize” would await Britain from taking the right decisions. There would still be “shovels in the ground [and] cranes in the sky: the sounds and sights of the future arriving,” she said, in the beginnings of a pivot to a more optimistic message.

Attacking the “trickle down and trickle out dogma” of the previous Conservative administrations, she argued the age of governments “getting out of the way to leave markets to their own devices”, was over. The time was now for an activist state to steer the path.

But while some economists speculate Reeves could ease the government’s self-imposed fiscal rules – dictating that debt as a share of the economy must be falling in the fifth year of forecasts produced by the Office for Budget Responsibility – there were no real clear hints she would do this.

The chancellor’s task in Liverpool was always going to be to pave the way for next month’s budget. After a speech light on detail, but positive about the prospects for change, Reeves will be under pressure to take decisive action next month.