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8 February 2024

Keir Starmer and Rachel Reeves announce dramatic cut in green plan

Labour will now pledge only to invest £4.7bn a year rather than £28bn.

By George Eaton

The last week has left Labour observers asking whether Keir Starmer or Rachel Reeves is in charge. While the former continued to defend the party’s £28bn green investment plan, the latter refused to let the figure pass her lips. 

In recognition of the fact this confusion could not continue, the pair held a joint briefing with journalists in parliament this afternoon to announce Labour’s revised Green Prosperity Plan.

As long anticipated, the party will no longer seek to raise investment to £28bn a year by the end of the next parliament – a decision that Ed Miliband fought but has accepted. The £28bn figure, Starmer said, had been “stood down”. He explained: “At the moment all you ever ask us about is the size of the cheque, we want to have an argument about the outcomes”.

Labour is now committed to only £4.7bn of investment a year (or £23.7bn across the next parliament) in addition to existing government investment of £10bn. The new total will be funded by raising £10.8bn through an expanded windfall tax and by borrowing £12.9bn (subject to the party’s fiscal rules). Since Labour is, however, still committed to its target of clean power by 2030, many will question whether the sums involved are at all adequate to meet this goal (party sources insist the target has always been largely dependent on private funding).

To fund the public investment that remains, Labour will increase the energy profits levy on oil and gas companies from 75 per cent to 78 per cent (the same rate as Norway), end loopholes and extend the end date of the the windfall tax from 2028 to 2030.

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The funding will be split between Great British Energy, a new publicly-owned renewable energy company (£8.3bn); a National Wealth Fund (£7.3bn) to invest in industries such as electric vehicle production, ports and clean steel; a British Jobs Bonus (£500m per year) for clean energy companies hiring workers in industrial areas; and a Warm Homes Plan to insulate up to five million homes over the next parliament (£6.6bn).

In defence of the decision, Starmer and Reeves cited the spike in interest rates since the plan was originally announced in 2021 and reports that Jeremy Hunt intends to “max out” the government’s headroom by cutting taxes in the Budget. Pressed on why Labour would not seek to reverse future tax cuts, Reeves cited the cost-of-living crisis and the rise in overall tax levels to a postwar high.

Asked whether it was himself or Reeves in charge, Starmer replied: “We operate together, we are in lockstep, I’m obviously the leader of the party, these are our decisions. Rachel and I share our thinking and analysis on all things economic… We are very, very closely aligned, that’s why Rachel’s office is on the same corridor as mine and our teams are basically intermingled.”

Meanwhile, in a statement, Miliband said: “Labour will be fighting the election with a world-leading agenda on climate and energy with every single individual policy already announced now confirmed for the manifesto: Great British Energy, a National Wealth Fund, a Warm Homes Plan, a British Jobs Bonus, a Local Power Plan and no new oil and gas licences as well as our 2030 clean power mission.”

The slowest U-turn in history, as some have dubbed it, has provided Labour with a lesson in the perils of indecision. But the “Ming-vasers” in the shadow cabinet who feared that the £28bn figure was always an electoral liability will be content tonight. The “front-footers”, meanwhile, will challenge the party to do more to demonstrate how it stands for change.

[See also: Michael Matheson’s resignation deepens Humza Yousaf’s woes]

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