Labour scales back £28bn green investment pledge amid economic concerns

Labour has revised its commitment to invest £28bn annually in green industries, citing the need for fiscal responsibility. The original pledge, made in 2021, proposed investing £28bn per year until 2030 in green projects. However, Shadow Chancellor Rachel Reeves now plans to gradually increase investments starting from a potential 2024 election victory, reaching the £28bn per year mark by 2027.

Reeves explained to the BBC that following the Conservatives’ economic mismanagement, it was crucial not to be “reckless” with spending. She emphasised the importance of financial stability in light of rising prices and interest rates. Factors such as the conflict in Ukraine have led to soaring inflation, prompting the Bank of England to raise interest rates in an attempt to control escalating prices.

“The truth is I didn’t foresee what the Conservatives would do to our economy,” Ms Reeves said. “We will get to the investment that is needed. But we’ve got to do that in a responsible way.”

Reeves did not provide a specific investment figure for the first year of a Labour government, arguing that the economic landscape would not be clear until closer to the time. The Green Prosperity Plan, announced in 2021, proposed spending £28bn on projects such as offshore wind farms and electric vehicle battery development. However, the economic situation has shifted significantly, with rising interest rates and borrowing costs.

A senior Conservative source commented that it was unsurprising Labour had revised its pledge, stating that borrowing £28bn annually for a decade would fuel inflation and force the Bank of England to raise interest rates even further. The source also noted that there were “still issues with the pledge” and “a lot of deadweight cost where the private sector would’ve invested anyway”.

Reeves criticised the agreement Prime Minister Rishi Sunak reached with the US during his recent visit to Washington. Although plans for a full free trade agreement have been abandoned, the new proposals include granting UK electric car companies access to US green tax credits and subsidies. Reeves said she was “staggered” that Sunak returned with “no industrial plan for Britain”.

Labour’s “secureonomics” strategy, inspired by US President Joe Biden’s plan to tackle inflation and create jobs, includes a large package of subsidies and tax breaks for green industries. However, Reeves emphasised that this strategy would be “built on the rock of financial stability and economic security”, with strict borrowing limits. Labour has also pledged to establish a publicly owned renewable energy company to create jobs and enhance the UK’s energy security. Last week, the party committed to banning new licences for oil and gas production in the UK, despite union concerns about potential job losses.