That is that. The end. The £28bn is no more. Labour has scrapped its commitment to spend £28bn a year on the green transition.
The figure was always a mirage. The real policy – the policy that will actually decide what Labour does in government – is the party’s fiscal rules. Modelling from the think tank Labour Together, as George Eaton reports in this week’s New Statesman cover story, suggests the £28bn would break those self-imposed constraints. Hence it is not going to happen.
This is government by fiscal headroom. Labour’s policies sit downstream from the fiscal rules. Those in Labour who woke up this morning angry at the U-turn should direct their attention there.
That’s the reason the debate over the figure itself was about winning the next election, not the policy itself. The gambit is that it is better to suffer the accusation that Starmer has no conviction, than to be accused of borrowing too much money. Is that the right calculation? It carries serious risks. It could be a misappraisal of Labour’s strengths and weaknesses. The biggest problem voters have with Starmer is that he looks inconsistent and unprincipled, not that Starmer is scary or that the party is not trusted on the economy.
The decision will also fail to close down Conservative attacks. It is not as if the latter will now say: “Ahh well, Keir said he wouldn’t borrow £28bn so we best stop saying he’ll raise taxes – he even has the same debt reduction target as us!” The Tories always accuse Labour of being untrustworthy with the public finances. It’s the first principle of British politics. The attacks won’t stop. Instead, No 10 will be grateful for further evidence to parade in front of voters that Labour stands for nothing.
The hope within Labour is that attention can now shift on to the policies that will actually deliver the green transition – such as insulating homes and the publicly owned company GB Energy. But shadow ministers looking forward to showcasing their plans for green steel and a national wealth fund will be disappointed. They will be questioned every day between now and the election over how they will fund these individual policies. Whether it’s £28bn for the whole package or £6bn for home insulation, the attacks will remain the same.
This is the first major crack within the party’s top leadership and is a win for the fiscal hawks and party strategists. The communication on this policy has been poor. And it’s an embarrassment for Starmer. Only this week the Labour leader argued that it was essential a Labour government invested that amount to grow the economy and deliver the green transition – “desperately needed” was the phrase he used. The speed with which he has been forced to publicly reverse his position – at a time when his shadow chancellor was saying the opposite – is a blow to his authority within the party and presages a fundamental split.
Because these spending problems are not going to disappear. There are large cuts pencilled in for after the election. With the party’s position not to increase taxes – while raising expectations of tax cuts – Labour is slowly ruling out every path available to it apart from austerity.
Earlier this month, Starmer boasted that he was up for a fight on the principle that economic growth requires investment. If this was a fight, the Labour leader has been routed.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.