Labour to Drop £28 Billion Green Spending Target in UK Plans

(Bloomberg) -- Opposition leader Keir Starmer is expected to ditch the £28 billion ($35 billion) annual spending target from his pledge to convert the UK to green energy by 2030, after weeks of party wrangling triggered by the country’s economic outlook and the looming general election.

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Starmer will confirm Thursday his Labour Party is ditching the annual spending target, part of its flagship policy for government to decarbonize the electricity system and invest in environmentally sustainable industries, the Guardian and other newspapers reported. A Labour spokesperson confirmed the party would be making an announcement, but declined to comment on the content.

The potential move, at the deadline for Labour’s shadow ministers to submit their manifesto ideas ahead of a UK election expected in the autumn, has been widely expected but will still cause a political headache for Starmer. The £28 billion figure was one of Labour’s most concrete and recognized policy goals, and backing away from it will anger supporters who want the party to lead the fight against climate change — as well as potentially alarming voters who want to see a clearer message about what the poll-leading party stands for.

But the prominence given to the number also made it a target for Rishi Sunak’s Conservative Party, which is building an election campaign around tax cuts — despite having raised the UK’s tax burden to a postwar high on the prime minister’s watch. Sunak has repeatedly said Labour’s green spending plan is proof Starmer is planning a tax-and-spend agenda. In choosing to cut taxes before the election, the Tories are also making it harder for Labour to show where it will fund its pledge while keeping to so-called fiscal rules.

By dropping the spending commitment, Starmer and shadow chancellor Rachel Reeves would be hoping to block off that Tory angle of attack. It’s a gamble that relies on the idea that attacks based on Labour changing its mind — which Sunak did on social media on Thursday — are less potent than electoral attacks based on voters’ fears about high taxes.

Yet it’s also a gamble that voters accept Labour’s core argument — that the Conservatives are to blame for leaving the economy in a condition where that level of green spending is not doable. Starmer is expected to press that point, while repeating the recent argument of his officials that Labour is committed to the green economy even as it must wait until taking office to see what numbers are possible.

He’s also likely to link that problem to the economic chaos triggered by former Tory premier Liz Truss, which saddled the UK government with higher borrowing costs.

Even so, Starmer will still face a party management issue — arguably his first major one since he expelled his predecessor Jeremy Corbyn from the parliamentary party in late 2020. In recent days, Labour’s shadow cabinet have appeared split over the policy, which is closely associated with a key Starmer ally, former leader Ed Milliband.

Some senior figures have refused to use the £28 billion figure, while Starmer on Tuesday told Times Radio that the sum was “desperately needed.”

As reports emerged that the number would be finally ditched Thursday, there was a backlash from influential Labour figures.

“It’s probably the most stupid decision the Labour Party’s made,” John McTernan, a former adviser to ex-prime minister Tony Blair, told BBC’s Newsnight late Wednesday. “Great parties have great causes. If you don’t have a great cause, you want to change from this government, sure, but change to what? What’s the change Labour now offers? It’s very disappointing.”

It’s an argument that hinges on the theory that with Labour ahead of the Tories by around 20 points in national polls, the party can afford bold aspirations for its manifesto at it plans to oust the Tories after 14 years in power.

Labour MP Barry Gardiner, a former shadow energy minister, said ditching the green pledge is “economically illiterate” and “environmentally irresponsible,” and risks a manifesto “so bland that you stand for nothing.”

The counter argument is one that points back to Labour’s unexpected loss in the 1992 general election, when it led ex-premier John Major’s Tories in the polls and the UK was still reeling from a deep recession. Labour blamed the shock on right-wing newspapers swaying voters.

Since taking over Labour in 2020, Starmer’s strategy is to separate the party from Corbyn’s left-wing policies which officials say contributed to the historic defeat in the 2019 election. The shift to the right has seen Reeves rule out raising taxes and seeking to reassure business about Labour’s intentions.

That has made the flagship green energy plan, which was first announced in 2021, a hostage to economic fortune. The policy was first rolled back last June, when Labour said the state of the economy meant it could only “ramp up” spending to £28 billion a year in the second half of its first term in office.

Choosing to scale it back again is a risk. The timing has also not been kind to Labour, just as it was announced global warming exceeded 1.5C across a full year for the first time.

“We need to invest,” climate scientist Bob Watson told BBC radio on Thursday. “We can’t simply go and transition to a low carbon economy.”

(Updates with reaction, background from 10th paragraph.)

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