Labour backtracks on £28bn green prosperity plan

Shadow chancellor Rachel Reeves refused to commit to new spending figures until the financial situation the Opposition would inherit becomes clearer.

The party had promised in 2021 to invest £28 billion a year until 2030 in green projects if it came to power.

But Ms Reeves said on Friday that figure would instead be a target to work towards in the second half of a first parliament, blaming the Tories for having “crashed our economy”.

The shadow chancellor said demonstrating “responsibility” with borrowing would be crucial amid soaring interest rates and high inflation.

Ms Reeves appeared to admit that the party’s green proposals risked spooking the markets as Liz Truss’s disastrous mini-budget did last year.

She would not say how much investment in the plan there would be in the first year of government but suggested details would be given following further fiscal updates from the Government.

“I will never be reckless with the public finances,” the shadow chancellor said.

“Economic stability, financial stability, always has to come first and it will do with Labour.

“That’s why it’s important to ramp up and phase up our plans to get to the investment we need to secure these jobs so that it is also consistent with those fiscal rules to get debt down as a share of GDP and to balance day-to-day spending.”

Ms Reeves insisted that Ed Miliband, the shadow net zero secretary who set out the multi-billion pound investment plan, was “on the same page” as her.

The Tories sought to stress Labour was simply delaying its ultimate goal of reaching the £28 billion commitment, which they said would spell “disaster” for the economy.

Conservative Party chairman Greg Hands said: “Keir Starmer’s main economic policy is in tatters, after even he and Rachel Reeves realised it would lead to disaster.

“It doesn’t matter if they try and pretend otherwise, Labour’s plan remains to stick £28 billion of borrowing on the Government credit card which will lead to higher inflation and higher interest rates.”

Labour’s flagship green prosperity plan, billed as the party’s answer to Joe Biden’s clean energy-promoting Inflation Reduction Act, included pledges to invest more in projects such as wind and carbon capture.

But its fiscal rule – that debt must be falling as a share of national income after five years – has always been the party’s priority, Ms Reeves argued.

Asked whether the commitment potentially could have got into Labour into “the same difficulties” as Ms Truss last year, she replied: “Which is why I always said our fiscal rules would always be non-negotiable because they are the rock of stability upon which everything else is built.”

The shadow chancellor also hit out at Prime Minister Rishi Sunak’s trip to Washington in which he and US President Mr Biden announced an agreement to deepen UK-US ties.

Hopes of a full-blown trade deal have been abandoned but the new “declaration” by the two leaders includes commitments to allow UK companies access to US green tax credits.

Ms Reeves, who visited the US herself last month, said she was “staggered” that Mr Sunak had returned with “no industrial plan for Britain”.

Following Labour’s rowback, analysts warned the UK is set to miss out on future investment in key industries such as green hydrogen while businesses turn instead to the US and EU to back clean energy growth.

Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU), said: “Since the Inflation Reduction Act was passed nearly a year ago, spades have hit the ground in the US, but the UK’s been stuck in the mud.

“Whichever party is in charge in the coming years will have to prove why organisations should invest here compared to the US or EU, and with the global race heating up, there’s really no time to lose.”

Prospect, a trade union representing engineers and scientists, echoed the concerns, with deputy general secretary Sue Ferns saying: “It is not only just about the total investment, which of course is important, but also about giving investors, companies and the workforce long-term certainty. This is something which the current Government have failed to do.

“Any proper plan must put developing the skilled workforce that we need, and making sure that no communities are left behind as we transition to clean energy, front and centre.”

The Green Party accused Labour of rowing back at “the first sign of any difficulty” and said the move renewed the case for more of its MPs to win seats at the next election

Green co-leader Adrian Ramsay said: “This highlights more than ever why it is necessary to have more Green MPs elected at the next general election.

“We are witnessing environmental breakdown at an increasingly alarming rate, so you would have thought the Labour Party would understand that we need to see a transformational change if we are going to tackle the climate emergency along with the cost-of-living crisis that is causing so much harm in our society.

“Yet once again we see them offer a policy that does not go far enough, and then row back at the first sign of any difficulty.”