Labour is still not trusted to run the economy, shadow Chancellor Rachel Reeves admits

The public still does not trust Labour to run the economy, more than a decade after the financial crash, the shadow Chancellor has admitted.

The party has yet to “break that narrative” that it caused the 2008 implosion, Rachel Reeves said – summed up by the notorious “there is no money” note left by Liam Byrne, a Treasury minister.

Ms Reeves has used Labour’s conference to announce new spending rules, including that a Keir Starmer government would not borrow for day-to-day spending.

But, asked why Labour still lagged behind the Tories for economic trust, she told a fringe meeting: “I don’t think we’ve broken this narrative that, as Liam Byrne said, there is no money left. That has stuck.”

The shadow Chancellor repeated that it had been a global financial crisis, but acknowledged: “It doesn’t really matter, because that is the conclusion people came to.

“And, in the 11-and-a-half years since we left office, we still have not found a way to break that narrative.”

The admission came at a Resolution Foundation event, which highlighted how the last decade was the worst in living memory for living standards.

Household incomes grew by just 9 per cent, way behind the first decade of the century (22 per cent), the 1990s (21 per cent), the 1980s (30 per cent), the 1970s (18 per cent) and the 1960s (19 per cent).

“That is not normal for the British economy,” said Torsten Bell, the think-tank’s chief executive. “So, the question is, why, when it’s a complete catastrophe, is Labour still behind the Conservatives on economic competence?”

George Osborne, the former Tory chancellor, successfully rammed home the message that Labour overspending caused the crash, although he later acknowledged the claim was false.

A recent Opinium poll found that – despite low growth even before Covid struck – the Conservatives lead Labour as the best party to run the economy by 41 per cent to 27 per cent.

Internal focus groups have confirmed that voters still fear that Labour would be unable to resist spending money it did not have.

In her conference speech, Ms Reeves carved out a divide with Rishi Sunak, the Chancellor, by pledging to spend £28bn-a-year on green jobs to fight the climate emergency.

But a key fiscal rule, to reduce debt as a share of national income, mimics the 2019 Tory manifesto – and Ms Reeves told the fringe meeting she “worried” about debt standing at 100 per cent of GDP.

Mr Bell said the tradition tax-and-spend election battle was over because the huge tax hikes announced by Boris Johnson and Mr Sunak meant “the death of low tax Conservatism”.

But Ms Reeves said that was “too simplistic”, because the key question is tax fairness – as Labour prepares to make the wealthy pay more, rather than workers through the National Insurance increase.