Labour has ditched a pledge to invest £28 billion-a-year on environmental projects in a major U-turn following months of uncertainty about the plan, in a move set to disappoint green campaigners.
Sir Keir Starmer confirmed that the pledge, central to Labour’s flagship Green Prosperity Plan, will be drastically scaled back with the party now set to spend £23.7 billion over the course of the next parliament.
The Conservatives had seized on the original figure as a key attack line in the run-up to an election this year, claiming Labour would ultimately have to raise taxes to meet the “unfunded spending spree”.
The party’s Warm Homes Plan, a £6 billion package of measures to improve energy efficiency, is set to be one of the casualties of the climbdown with Labour confirming that it will now take longer than originally estimated with five million homes now set to be upgraded during the first five years.
But it comes alongside plans to extend the windfall tax on oil and gas companies to the end of the next parliament, with the energy profits levy rising to 78%.
Sir Keir sought to play down the U-turn on Thursday, telling reporters “everything on the table is staying on the table” when it comes to the Green Prosperity Plan.
The Labour leader insisted the party in power would still retain its mission to achieve clean power by 2030, stressing that it could still be achieved.
“There is nothing we have said we will do that we are now saying we won’t do.
“I don’t want to have a row about the size of a cheque. I want to have a row about the outcomes,” Sir Keir said.
Labour will hope the move will end speculation about the scale of the plan, as well as neutralising Tory attacks.
Last year, Labour adjusted the original plan by saying the spending target would likely be met in the second half of a first parliament, rather than immediately, if the party wins the next election.
The party had also insisted the pledge would be subject to its fiscal rules, which include getting debt falling as a percentage of GDP.
Confusion over the future of the policy had grown in recent weeks as some senior figures refused to refer to the £28 billion-a-year figure, while Sir Keir continued to do so as recently as Tuesday.
Shadow chancellor Rachel Reeves had repeatedly declined to recommit to the spending pledge, instead highlighting the need for “iron discipline” with the public finances.
She repeated her claim that she would still be Britain’s first green chancellor if Labour wins the next general election, as she and her party leader blamed the Tory stewardship of the economy and higher interest rates for the reversal.
“These policies will transform our economy in ways that are incredibly exciting and can boost growth and I am determined to do that.
“But if we made commitments to policies that we wouldn’t be able to meet, we’d end up letting people down,” she said.
Sir Keir insisted that he, Ms Reeves and shadow climate secretary Ed Miliband were all united behind the decision.
🇬🇧 Labour's Green Prosperity Plan will create good jobs across Britain, cut bills and deliver energy security. pic.twitter.com/Knh5N4rFpJ
— The Labour Party (@UKLabour) February 8, 2024
The party has moved to drop the pledge ahead of the Chancellor’s Spring Budget, and comes the same day as the deadline for shadow ministers to submit policies for the election manifesto.
The move was met with ridicule by the Tories, who have seized on what they describe as Sir Keir’s “flip-flopping” on major policies as a key attack line.
Prime Minister Rishi Sunak warned the “uncertainty about what a Labour government would do is a real risk to our country’s future”.
But it sparked an immediate backlash from green campaigners, as well as warnings from trade union allies, figures in the energy industry and even within Sir Keir’s party ranks.
Unite general secretary Sharon Graham welcomed Labour commitments to the steel industry, but said: “Britain needs more, not less, investment and there is still much to do in order for Labour to gain the trust of workers impacted by net zero.
“If Labour keep getting scared off by Tory attacks, they will end up outsourcing their policy-making to the Conservatives.”
Emma Pinchbeck, chief executive of trade association Energy UK, warned that “business needs to know that politicians won’t pull the rug from under them”.
She said: “Labour’s spending plans are a signal to the market. The party has been engaging constructively with business over recent months, but retaining the confidence of the market is dependent on not making U-turns that damage the UK’s investability.”
Labour MP Clive Lewis said “it looks like we’re going to experiment with a variation of austerity” and told Times Radio: “I think we need to change the (fiscal) rule if it’s going to stop us from doing what we need to do to get this country out of the hole it is when it comes to a lack of investment.”
Mike Childs, head of policy at Friends of the Earth, accused Labour of having “turned its back on the people who most urgently need these essential upgrades – the many millions of low-income households suffering from living in poorly insulated homes”.
Greenpeace UK’s co-executive director, Areeba Hamid, accused Sir Keir of having “caved like a house of cards in the wind”.
She said: “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.”
Former Labour minister Lord Blunkett said “the optics, the PR, the timing” of the U-turn on spending £28 billion on green projects “couldn’t have been worse” and he hopes “lessons have been learned”.
Speaking to BBC Radio 4’s PM, he said: “I think they’re better doing it now than let people down in government when we inherit what Keir Starmer spelt out as being a financial disaster.
“I think the optics, the PR, the timing could not have been worse, and I hope lessons have been learned not least in the run-up to the Budget where we, as a party, will have to decide what we’re tracking in terms of government changes and what we’re not.”
He defended the commitment of Sir Keir and Ms Reeves to the programmes in their green prosperity plan, saying: “The reality is that the programme’s there, the commitment’s there, the funding will be found and it would never have been found immediately anyway… so take a deep breath, don’t believe this is a great betrayal because it isn’t.
“But if they’d done it three months ago and they’d managed to stop people with these terrible unattributable briefings that have been going on and made the decision then, announced it and above all had a narrative to go with it, we wouldn’t be in the situation we’re in today.”
The Confederation of British Industry (CBI) warned that Britain faces a “race against time” with global competitors offering significant financial incentives, but added that the UK’s pitch “must now be how it can outsmart, not outspend, its competitors”.
“This should be a time when we champion our net zero progress and double down on our green growth ambitions. All parties should be mindful of the signals they send out about the UK’s openness and readiness for green investment,” CBI chief executive Rain Newton-Smith said.