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Going, going, gone

9 February 2024
| by Field Team

Labour has reversed its policy of investing £28 billion a year on Britain’s green energy industry. The Field Team analyses why this U-turn became inevitable, and what it might mean for the party in an election year.

In one of the most predictable U-turns in recent memory, Labour has finally confirmed it has dropped its commitment to spend £28 billion pounds a year on Britain’s green energy industry. Instead of investing up to £28 billion a year on top of the Government’s planned spending as first announced in October 2021, Labour will now spend £23.7 billion over the parliament as a whole. The plan - which was coming under sustained criticism from the Conservatives - was the centrepiece of a Labour’s offering for Government. So how on earth did Labour get itself in this mess?

In the end, the question for Sir Keir Starmer and his team was a relatively straightforward one, though without an easy answer. The Conservatives’ main - perhaps only - two working attack lines were Starmer abandons policies when politically expedient because he has few political convictions, and Labour’s £28 billion a year spending plan would lead to surging debt and deep tax rises. Ultimately, Starmer had to decide between these. His choice to ditch the green spending, and open himself up to attacks of flip-flopping was the logical one, especially given recent public spending forecasts which show significant tightening is needed over the medium term. But the length of time taken to get there does raise questions about Labour’s processes.

For those who have not been closely monitoring Labour’s green spending plans over the last few years (we’re jealous), the Green Prosperity Plan was announced at Labour’s party conference in October 2021, before being scaled back last summer to merely ‘ramp up’ to the £28 billion figure. It was then pared back again last Autumn to include the Government’s current green spending and caveated to only exist within ‘fiscal rules’ which dictate that debt should fall in the medium term. 

As is typical for Governments and Oppositions when tensions exist around the affordability of a policy commitment, this situation has been widely written-up as a Chancellor versus Leader showdown, with Rachel Reeves’ camp supposedly arguing vehemently against it whilst Starmer’s inner-circle pleaded for its retention as a tangible plan for government. But this should not be overblown; Starmer and Reeves’ relationship has been widely seen as close and productive, with this as the first possible sign of tension. 

One should spare a thought for Shadow Energy Secretary Ed Miliband, who has seen his bigger ambitions dropped as his policy platform was trimmed and is reported to be disappointed – though critically, he’s not resigned.

Labour did commit to delivering everything it had previously announced on green spending, with savings mostly coming from unannounced green spending. Publicly-owned GB energy will still be set up with £8.3bn, as will a National Wealth Fund with £7.3bn to invest in green industries and unlock private investment. The Warm Homes plan will now only reach five million homes over five years instead of nineteen million homes over ten, but doubts already abounded about the possibility of that plan.

The wider business community will be disappointed. Labour has been forthright in attacking the Tories over their perceived inability to stick to their commitments and provide certainty to business. Indeed, just last Autumn Labour attacked the Government for scaling back their Net Zero ambitions, a charge which could easily now be turned back on them. Labour’s business charm offensive has largely been successful so far, but this U-turn may just take some of the shine off.

All of which leads up to perhaps the most important questions- what does this mean for the election, and for a possible Labour government? For a start, Tory attacks on Starmer’s character and ability to keep to his word will go into overdrive, and they may seek to create further dividing lines on green issues in hopes of forcing further Labour climbdowns. Polling expert Sir John Curtice has said the U-turn “does reinforce the impression that people don’t know what Starmer stands for, they don’t know what he is going to do and they haven’t quite been convinced”.

But given Labour’s poll lead is driven in large part by apathy towards the Conservatives, this decision is unlikely to have a material impact on the polling landscape. Clearly, Labour’s processes must improve. In government they would not have months or years to make these policy decisions- they’d be lucky to have a few days. Labour claims to be a serious government-in-waiting, but must act with speed and certainty now or risk facing a nasty shock if and when it is them who hold the country’s fate in their hands.

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