LIVERPOOL, England (AP) — Britain’s Treasury chief warned Monday that “harsh global headwinds” from wars in Ukraine and the Middle East and U.S. President Donald Trump’s tariffs have worsened the U.K.'s economic outlook since the governing Labour Party won power last year.
Chancellor of the Exchequer Rachel Reeves told Labour's annual conference that her economic plans must be “fit for an uncertain world," a hint she will raise taxes in her autumn budget on Nov. 26.
“In the last year the world has changed, and we are not immune to that change," she told the BBC before the speech. “Whether it is wars in Europe and the Middle East, whether it is increased barriers to trade because of tariffs coming from the United States, whether it is the global cost of borrowing, we’re not immune to any of those things.”
Since ending 14 years of Conservative rule in July 2024, Labour has struggled to deliver the economic growth it promised. Inflation remains stubbornly high and the economic outlook subdued, frustrating efforts to repair tattered public services and ease the cost of living.
Labour pledged during the election not to raise taxes on working people, but has since hiked levies on employers.
Reeves told the BBC she was "determined not to increase those key taxes that working people pay,” stopping short of ruling out any hikes at all.
In her speech, interrupted by repeated standing ovations from hundreds of Labour members — and by a lone pro-Palestinian protester — Reeves leavened her sober assessment of the country’s finances with a touch of optimism. She outlined the government's investments in defense, transport, energy and education, claiming they were making a difference to millions of people.
She pledged to end long-term youth unemployment, sayingr everyone under 25 who has been unemployed for 18 months will be offered guaranteed paid work. One in eight 16–24-year-olds in Britain — about 1 million people — is currently not in education, work, or training.
Reeves also said the government was working on an “ambitious agreement on youth mobility” with the 27-nation European Union. British citizens lost the right to move and work freely in the EU when the country left the bloc in 2020.
Thousands of Labour members are in Liverpool, northwest England, for the party conference -– a mix of policy forum and pep rally that this year is lacking in pizazz.
The hard right is a key concern
Labour lags behind Nigel Farage ’s hard-right Reform UK party in opinion polls, and some party members are losing faith in Prime Minister Keir Starmer, even though there may be four years until the next election.
Many are rallying around Andy Burnham, the ambitious Labour mayor of Manchester, who said Sunday that the party is in “peril” and needs to change direction.
Reeves took aim at those in Labour, such as Burnham, who argue the government should borrow more to spend more on public services. She cited former Conservative Prime Minister Liz Truss' disastrous 2022 plan for unfunded tax cuts, which sent the value of the pound plunging and the cost of government borrowing soaring.
“When spending gets out of control, when market confidence is lost ... it is felt immediately in the growing cost of essentials, and rising interest rates," Reeves said.
The threat posed by Reform is top issue among Labour delegates at the four-day conference, which ends Wednesday. Farage’s party has only five lawmakers in the 650 seat House of Commons, and Labour has more than 400. Nonetheless, Starmer said Reform is now Labour's chief opponent, not the main opposition Conservatives.
Starmer has described the fight between Labour and Reform as “a battle for the soul of this country.” On Sunday he accused Farage of sowing division with plans by Reform to deport immigrants who are in the U.K. legally. Starmer said such a policy would be “racist” and “immoral.”
The U.K. government has toughened its own language about immigration, though. Home Secretary Shabana Mahmood is expected to announce plans on Monday to raise the bar immigrants must meet to gain permanent residency. Under the proposals, people will have to have a “high standard” of English, “a spotless criminal record” and give back to their communities to get the right to settle in the U.K.