There was no screeching U-turn in Rachel Reeves’ speech to delegates at the Labour party conference. But make no mistake, the chancellor is changing course. Earlier this month she had warned of a “painful” budget. In Liverpool, Rachel Reeves said her “optimism for Britain burns brighter than ever”. In a matter of weeks, the tone has gone from doom to dreaming. This was necessary because Ms Reeves had, as the former Bank of England chief economist Andy Haldane noted, erred by creating a sense of “fear and foreboding” which threatened to undermine a potential economic recovery. Consumer confidence was sinking. Labour’s poll lead over the Tories on the economy disappeared. Something had to be done.
But it is unclear whether Ms Reeves has done enough. She did reiterate that Tory overspending meant “tough decisions” lay ahead. It appears a self‑fulfilling prophecy is at play here. When people hear that economic conditions are expected to worsen, they may delay activities that stimulate the economy. While the nuances in the chancellor’s speech might be missed, Ms Reeves must hope that voters hear her promise of “no return to austerity”.
