By Alistair Smout
LONDON (Reuters) -Britain's opposition Labour Party said it would scrap a target to eventually spend 28 billion pounds ($35.3 billion) a year on green industries if it takes power, one of the biggest U-turns yet under party leader Keir Starmer.
Labour, which according to opinion polls is on course to win an election expected later this year, had vowed to invest heavily in green technologies and jobs to help snap Britain out of a prolonged period of economic stagnation.
But the governing Conservative Party has zeroed in on the policy over the last year, arguing it could lead to higher borrowing costs and tax rises for the public, while the country's deteriorating fiscal situation and rising debt costs had already seen the pledge substantially watered down.
Starmer said the worsened economic outlook and high borrowing costs meant that Labour would ditch the main spending target, though it would maintain a range of the policies, such as the creation of a publicly-owned green power company, which he said were fully funded.
"(But) we won't make further, or new, investment decisions. And that means that we won't reach the 28 billion pounds envisaged, and that figure is effectively stood down," he told broadcasters.
"The reason for that is because since we announced the 28 billion, the Tories (Conservative Party) have done terrible damage to our economy... I have to anticipate the circumstances as they are now, not as I'd wish them to be."
Labour's updated green investment plans said it would instead spend less than 5 billion pounds a year on green projects, with a plan to invest in home insulation also scaled back.
The plan is to be funded through a windfall tax on oil and gas firms, and "borrowing to invest within Labour’s fiscal rules," the party said.
Labour, which lost power in 2010 in the aftermath of the 2008 financial crash, has sought to portray itself as the party of fiscal responsibility to try to rebuild confidence that it can be trusted to run the economy once again.
That has led to the gradual erosion of a one-time flagship pledge. In 2021, Labour initially said it would invest 28 billion pounds every year until 2030. That ambition was scaled back last year.
More recently it had said it would deliver the investment more gradually and aim to hit the 28 billion pound annual figure in the second half of the term of a future Labour government.
In recent weeks senior party figures had emphasised that the outlook for public finances in the future appeared bleak, and the target would only be reached subject to a Labour government sticking to strict fiscal rules.
Starmer criticised the Conservatives, who he said planned to "max out the government's credit card", in reference to their aspiration for pre-election tax cuts.
The decision to ditch the 28 billion figure entirely led to renewed attacks from the Conservative government, who have criticised Starmer's leadership for policy reversals.
"Keir Starmer confirms he doesn't have a plan for Britain. His pledge has a £28bn price tag and now he's admitted there's no plan to pay for it, which means going back to square one with higher taxes for working people," Prime Minister Rishi Sunak said on X, formerly known as Twitter.
Starmer's announcement was also criticised by environmental groups and even some in his own party, with Labour lawmaker Bell Ribeiro-Addy saying "we will need rapid and radical action to combat climate breakdown."
"Now is not the time to scale back our green industrial strategy," she said on X.
($1 = 0.7925 pounds)
(Reporting by Farouq Suleiman, Sachin Ravikumar and Alistair Smout in London and Utkarsh Shetti in Bengaluru; Editing by Daniel Wallis)