Reeves defends ‘tough decisions’ as Labour showdown over winter fuel cut looms

Rachel Reeves will insist that “tough decisions” on the public finances are needed to prevent economic ruin but she will attempt to persuade her critics that there will be “no return to austerity”.

In her first Labour conference speech as Chancellor, she will also promise action to tackle tax dodgers and claw back money from flawed Covid-era contracts.

But her decision to strip winter fuel payments from 10 million pensioners is likely to be the focus of a fierce debate at the party’s conference in Liverpool, with major trade unions demanding a U-turn on the policy.

Union sources indicated the issue would be debated on the conference floor after Ms Reeves’ speech on Monday, although a vote on the call for a reversal of the policy could be pushed back until later in the week.

The Chancellor will say her October 30 Budget statement will deliver on the change Labour offered at the election.

After weeks of warning about a poor economic legacy left by the Conservative government, Ms Reeves will attempt to strike a more positive note, saying “my optimism for Britain burns as bright as it ever has done”.

“I can see the prize on offer, if we make the right choices now. And stability is the crucial foundation on which all our ambitions will be built,” she will say.

“The essential precondition for business to invest with confidence and families to plan for the future.

“The mini-budget showed us that any plan for growth without stability only leads to ruin.”

Ms Reeves will insist economic stability is “the crucial foundation on which all our ambitions will be built”, as she seeks to justify to Labour members the spending restrictions which are aimed at filling a £22 billion “black hole” in public finances.

She will say: “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 legacy and that means tough decisions. But we won’t let that dim our ambition for Britain.

“So it will be a budget with real ambition. A budget to fix the foundations. A budget to deliver the change we promised. A budget to rebuild Britain.”

In a signal of Labour keeping its manifesto commitments, Ms Reeves will promise not to raise national insurance, income tax and VAT.

She will also say corporation tax is to remain at its “current level for the duration of this Parliament”.

Other measures in her speech will include:

– A recruitment drive and reforms to HM Revenue and Customs to tackle tax dodgers because “at a time of hard choices, I will not tolerate the minority who continue to avoid paying what they owe”.

– A promise to recoup money from Covid contracts, reversing the previous government’s policy of waiving £674 million of disputed deals because “we won’t turn a blind eye to rip-off artists and fraudsters who used a national emergency to line their own pockets”.

– Confirmation that the Government will produce a new industrial strategy next year, with an initial green paper produced at the time of the Budget.

But anger at Ms Reeves’ decision to means-test the winter fuel payment, worth up to £300 for pensioners, risks overshadowing her speech.

The Unite and CWU unions have tabled motions calling for the decision to restrict the payment to pensioners on benefits to be abandoned.

Their stance is backed by other unions including Unison, but Ms Reeves has insisted the move – which will save around  £1.3 billion this year – is essential to help fill the black hole in the public finances.

The wording of the motion which will be put to a debate and vote at the conference will be a compromise based on several different submissions on the same topic, some of which may attempt to water down the unions’ demands.

A protest organised by Unite is expected in Liverpool on Monday, ahead of the potentially charged debate at the conference.

But union sources believe a vote may not take place until Tuesday, the day of Sir Keir’s keynote speech, with the result possibly not revealed until Wednesday when there will be less attention on the conference.

Jeremy Hunt, the shadow chancellor, contested Labour’s assessment of the UK economy, and claimed Ms Reeves had “already damaged the UK’s international reputation by talking down her inheritance in order to score political points”.

He added: “If she believes in growth, where is the plan? People are beginning to suspect there may not be one.

“If all we get in the Budget is tax rises and employment laws that deter investment and job creation she will have thrown away a golden opportunity.”