Keir Starmer massively shrinks Labour’s green investments

Labour has dropped its pledge to spend £28 billion a year on environmental projects, Sir Keir Starmer has confirmed, in a major U-turn by the party, ITV News Political Editor Robert Peston reports

Keir Starmer hasn’t just ditched his promise to spend £28 billion a year on green investment, he has shrunk it as though it was put through the hottest wash. To choose a possibly jarring metaphor, fashionable super baggy jeans have become tiny hot pants.

That £28 billion every year becomes just £23.7 billion over an entire five-year parliament, or an average of £4.74 billion per annum.

That said, perhaps the more apt comparison is £18 billion contra the new lower £4.74 billion, because latterly Starmer and the shadow chancellor Rachel Reeves netted investment being committed now by this government off the £28 billion.

Even so, this is a massive cut, and the economic context is that investment in the UK has been below international norms for decades. Also, the ravages of inflation mean public sector investment was set to fall as a share of GDP even if Labour had stuck with its £28 billion.

Starmer’s explanation and justification is that the public sector finances have deteriorated since Reeves first made the £28 billion commitment in September 2021.

This is true, but there are plenty of economists who would argue that the £28 billion was not only affordable but the minimum necessary to re-start UK economic growth and improve the UK’s climate-change resilience - the more so since it was anyway conditional on a Labour government meeting its fiscal rules or debt constraints.

This is not the only big fiscal change announced by Starmer and Reeves today. They are also allocating the proceeds of a higher-rate and elongated oil-and-gas windfall tax to financing part of it what it styles as its Green Prosperity Plan.

As a result, the £4.74 billion a year green investment would be funded to the tune of £2.2 billion by the windfall tax and just £2.6 billion from new borrowing.

Starmer and Reeves insist they remain committed to their pledge to ensure all power generated in the UK will emit net zero carbon dioxide by 2030, via burying CO2 from gas power stations (carbon capture and storage), building much more renewable generation (onshore and offshore wind, nuclear and so on) and accelerating grid connections.

They believed that what may be lost through less public investment will be made up by massive easing of planning constraints and aligning regulation more closely with supplier and investor requirements, to unlock private investment.

In essence they will be riding more roughshod over nimbies and allowing the private sector more certainty over revenue flows. Which is likely to be effective, though neither is without controversy, especially on the left of their party.

The biggest and most conspicuous squeeze on their individual policy plans - which include the creation of a state-owned Great British Energy and the establishment of a National Wealth Fund - would be on the so-called Warm Homes Plan.

The cost of the number of homes Labour is now promising to insulate and make more energy efficient in the course of a parliament is being slashed from £6 billion every year to £6.6 billion over the course of an entire parliament. It means just 5 million homes that are cold and drafty will be brought up to basic standard in five years out of 16 million that require the upgrade.

Starmer and Reeves insist they are still ambitious to re-engineer the British economy. However much they may claim that individual plans are still largely intact, the headline numbers show much diminished ambition.

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