Labour has been accused of slashing its green investment plans by half, fuelling fears that if elected the Party will struggle to deliver on its clean power and economic growth goals.
Following months of speculation, Labour this afternoon published a new briefing note on its Green Prosperity Plan confirming it has dropped its high-profile goal to invest £28bn a year in green infrastructure by the end of the Parliament.
Instead, the updated plan commits to £23.7bn of investment over the course of the next parliament, with £10.8bn expected to be raised through Labour’s proposed windfall tax on oil and gas majors and a further £12.9bn to come from borrowing, which would remain subject to Labour’s fiscal rules.
The plan represents a drastic reduction on Labour’s previous green investment plans, with investment on energy efficiency programmes in particular set to face particularly steep cuts compared to Labour’s previous plans. The new plans equate to around £5bn of investment a year, sparking accusations the Party had cut its projected spending on green projects by around 80 per cent.
But when existing government spending plans are taken into account the strategy should see around £14bn to £15bn of public investment in green projects each year, representing approximately a 50 per cent cut on the previous £28bn a year plan.
Speaking to reporters earlier this afternoon, Labour leader Keir Starmer blamed the roll back on the economic inheritance the current government will leave the next Parliament.
“We will not reach the £28bn – the £28bn, therefore, is stood down and we focus on the outcomes,” he said. “We want to get to that place because at the moment all you are ever asked about is the size of the cheque and we want to have an argument about the outcomes, which is what matters.”
He insisted the change in plan was a direct result of the current government’s economic record. “We announced the £28bn two and a half years or so ago, when interest rates were very, very low,” he said. “Since then, Liz Truss crashed the economy and other damage has been done. [Interest rates] are now very, very high – interest on government debt is already tens of billions of pounds a year. We’ve always said we have to be within the fiscal rules and fiscal rules come first.”
He also rejected suggestions of splits in the Shadow Cabinet over the plan, insisting they remained in “lockstep” over the Party’s mission to deliver a clean power system.
Labour stressed its plan still represented an increase on the current government’s green infrastructure plans and was designed to deliver on its mission of building a clean power system by 2030 – a target many experts regard as hugely challenging.
Starmer said the Green Prosperity Plan remained integral to the Party’s mission to “turn a corner on 14 years of Conservative decline and invest in Britain’s future”.
“It is a plan for more jobs, more investment and cheaper bills,” he added. “It’s a plan to get our country’s future back.”
The new plan includes longstanding proposals to launch a publicly-owned energy company called Great British Energy, introduce a National Wealth Fund to invest in green industries, and push through planning reforms to accelerate the roll out of renewables projects and speed up grid connections.
It also confirms plans for a British Jobs Bonus to mobilise £500m of investment in 2026/27 in industrial areas, new rules to make it mandatory for corporates and financial firms to produce 1.5C-aligned transition plans, and confirmation of a Warm Homes Plan to “upgrade Britain’s homes and cut energy bills”.
Ed Miliband, Labour’s Shadow Secretary of State for Energy Security and Net Zero, said Labour would “be fighting the election with a world-leading agenda on climate and energy with every single individual policy already announced now confirmed for the manifesto: Great British Energy, a National Wealth Fund, a Warm Homes Plan, a British Jobs Bonus, a Local Power Plan and no new oil and gas licences as well as our 2030 clean power mission”.
However, the funding for many of these initiatives is significantly lower than had been previously expected.
The scaling back of Labour’s Warm Homes Plan appears to be particularly acute. It commits to invest a further £6.6bn to double the government’s already committed £6.6bn over the course of the next Parliament, but the funding falls far short of the original plan to invest up to £6bn a year in efficiency programmes over 10 years.
The briefing paper argues the funding represents a step towards Labour’s goal of ensuring every home that can be practically upgraded reaches an Energy Performance Certificate (EPC) Band C by 2035. It said the funding can reach millions of homes through a mix of “energy efficiency grants, delivered hand-in-glove with local authorities to target the areas and families in most need; government-backed zero-interest loans for green home upgrades like solar panels; and grants to make sure heat pumps are affordable for people who want them”.
But green groups will argue the lower than planned levels of energy efficiency investment will lead to higher energy bills for millions of homes and ensure the UK remains hugely reliant on imported fossil gas.
Meanwhile, Labour’s promised National Wealth Fund is to be trimmed with an updated budget of £7.3bn marking a reduction on previous plans to invest £8bn through the new fund.
Labour argued the fund could still prove transformational in catalysing the re-industrialisation of the UK, including through projects to decarbonise steel production, upgrade ports to be “renewable-ready”, build new gigafactories, scale up green hydrogen manufacturing, and roll out carbon capture projects.
It said it expects the funds unleashed through the National Wealth Fund to drive the creation of 200,000 direct jobs and up to 260,000 to 300,000 indirect jobs this decade, many of which it said would be located in the UK’s most economically deprived regions. Of the £7.3bn overall budget, some £2.5bn of funding would be set aside for steel decarbonisation, £1bn for industrial hubs, £1.5bn for new electric vehicle and battery factories, £1.8bn for port upgrades , and £500m for green hydrogen plants.
The new plan also earmarks £8.3bn for Great British Energy to invest in new homegrown clean energy projects, including floating offshore wind, tidal, and nuclear projects, in addition to partnering with the private sector to expand renewables capacity using more established technologies such as wind and solar.
The £8.3bn includes £3.3bn to be spent over the course of the Parliament on Labour’s Local Power Plan, which it said would be aimed at providing grants and loans to local authorities and communities to “create one million owners of local power”. The Local Power Plan would see GB Energy partner with energy firms, councils, and community cooperatives to develop 8GW of clean power by the end of the decade, it said.
And plans to offer up to £500m a year in capital grants to companies in low-carbon industries, including wind and solar energy companies, remain untouched. Under plans for a ‘British Jobs Bonus’, companies would be able to bid for Contracts for Difference if they can prove their activities will unlock jobs and build out supply chains.
Overall the plans represent a significant uptick in green investment compared to those from the current government, but the scaling back of the Budget will spark questions from businesses and investors as to whether the package is sufficient to deliver on Labour’s hugely demanding clean power targets. And there will be concerns as to whether even the downgraded investment plans will be delivered, given around £13bn is expected to come from borrowing that will only be permitted if it is in line with Labour’s fiscal rules.
Critics will also ask whether total additional green spending of around £5bn a year is capable of competing with the subsidies and investment on offer through the US Inflation Reduction Act and the EU’s Net Zero Industry Act.
Rain Newton-Smith, chief executive at the CBI, urged all parties to be “mindful of the signals they send out about the UK’s openness and readiness for green investment”.
“The green economy represents an enormous growth opportunity for UK plc, with firms around the country desperate to get in on the action,” she said. “With global competitors now providing significant financial incentives to investors, the UK faces a race against time to capitalise on its early mover status, predictable policy environment and well-developed supply chain or risk missing out on significant economic prizes.
“Investors will naturally respond to the size of investment – and ambition here is important. But the UK’s pitch must be how it can outsmart not outspend its competitors, with a focus on outcomes for our economy. This should be a time when we champion our net zero progress and double down on our green growth ambitions.”
The announcement sparked fierce criticism from environmental campaigners, who accused Starmer of having “caved like a house of cards in the wind”.
“Labour’s diluted prosperity plan has gone from £28bn a year extra in vital green investment to less than £5bn,” said Greenpeace UK’s co-executive director, Areeba Hamid. “Yet climate action, including borrowing to invest in warmer homes, remains hugely popular among voters. It would be ironic indeed if Labour’s attempt to make their manifesto ‘bombproof’ from Tory attack ended up just bombing on the doorstep instead.
“As well as scaling the investment back by around 80 per cent, just a fraction will be spent on insulating homes, and not even a penny will be spent on public transport. These are two of the sectors in greatest need of new government investment to seize the opportunities of green growth, level up the country and lower bills… The British public and businesses are crying out for a green industrial strategy fit for the 21st century, not a hollowed out plan with an empty wallet.”
The Labour leadership is also set to face criticism from within its own ranks, with many MPs and members fearful the U-turn will fuel accusations the Party is flip-flopping on its core economic growth plans.
Paul McNamee, director of the Labour Climate and Environment Forum, said: “It’s extremely disappointing to see a row back on the £28bn funding of the Green Prosperity Plan from Labour in the run-up to an election. Despite this the Green Prosperity plan still has the potential to be an ambitious piece of policy, to ensure energy independence, stable bills, and new jobs across the country.
“Selling this to the country as a climate policy rather than an industrial strategy designed to address the UK’s long-term issues was a misstep. Labour need to focus on the benefits that this plan will bring – jobs in the areas that need them most, lower energy bills, a more energy independent nation – to bring workers and communities with them, showcasing what green prosperity looks like in practice.”
Ed Matthew, campaigns director at E3G, said Labour now faced a major challenge to ensure its updated plan unlocks the necessary level of private sector investment.
“There is no question that Labour’s commitment to its fiscal rules has massively constrained its green investment ambition,” he said. “The fact remains that Labour has still pledged a major increase in green investment compared to the Conservative government’s plans. But this may not be enough to reach our climate and fuel poverty targets, and ensure we are internationally competitive – sparking life back into the economy. Labour will have to work hard to maximise the leverage of private investment, and back up the Plan with major tax incentives and smart regulation.”
His comments were echoed by Jess Ralston at the Energy and Climate Intelligence Unit (ECIU), who said: “There are billions of pounds waiting to be plugged into clean industries, but they need the right incentives and policy stability. This and any further roll backs from Labour jeopardise this at a time when competition is fierce with countries like the US going full throttle to attract net zero businesses. Indeed, investors reacted badly to the PM’s speech last September U-turning on key climate policies. Labour will now really have to deliver on other policies like planning reform.”
Meanwhile, there was little sign the U-turn will bring an end to attacks from the government over Labour’s green investment plans, after Prime Minister Rishi Sunak accused Starmer of ditching a key part of the Opposition’s growth strategy. “This was the flagship plank of Labour’s economic policy and it now looks like he’s trying to wriggle out of it,” he said. “I think it demonstrates exactly what I’ve been saying, that he U-turns on major things, he can’t say what he would do differently because he doesn’t have a plan. And if you don’t have a plan, then you can’t deliver change for our country.”
Keep up to date with all the latest green business news by signing up to the free Daily and Weekly BusinessGreen Newsletters.
#Hollowed #Labour #slammed #decision #cut #green #investment #plans
