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So long, £28bn: Can Labour achieve “green prosperity” without its headline pledge?

Keir Starmer is finally dropping the party's flagship investment policy. But how important is a number?

By Megan Kenyon

On the day of the party’s manifesto deadline, Labour is finally dropping its pledge to invest £28bn a year in the green economy. The figure was first announced in October 2021 by the shadow chancellor Rachel Reeves at the party’s annual conference in Brighton, and has remained a headline pledge. But by February 2024, it had, according to some corners, become an “albatross” around the necks of the shadow front bench. It had to go. While some prominent Labour voices have urged Starmer to hold on to the pledge (Clive Lewis MP, for one, and the metro mayors Andy Burnham and Steve Rotheram), on Thursday, Starmer is due to make a final announcement.

Was attaching a figure to an investment pledge three years out from an election a bad move for the party? As the promise was scrapped before the start of formal campaigning, that question will remain unanswered. (Weeks of speculation over the strength of the party’s commitment to the pledge may prove to have been worse).

Still, while the number is definitely gone, Keir Starmer may still have an opportunity to prove his “unwavering commitment” to a green future. Party sources have been keen to assert that the green prosperity plan (GPP) will remain part of Labour’s blueprint for government. But can the GPP go the distance without the headline price tag?

Despite its turbulent history, the GPP has been generally well received by voters. A poll released on 1 February by More in Common revealed the plan is Labour’s second most popular potential manifesto promise. In recent years, it has become more widely accepted by the public that the shift to the green economy is inevitable and essential. According to polling by Ipsos Mori, eight in ten people in the UK say they are extremely worried about climate change. In the same poll a majority expressed their support for net zero policies. Public concern lies with how, not whether, a current government plans to reach net zero. Clearly in outlining its plan for green growth via the GPP, Labour showed the public it is capable of leadership on this issue – in direct contrast to the Sunak government’s sceptical, uncertain approach.

[Read more: Why Labour has finally U-turned on its £28bn green pledge]

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Contrary to Westminster perceptions, a show of leadership around the green transition is not just important to younger, urban, middle-class voters, but to those in more marginal, Red Wall areas too. Sam Alvis, director of energy and environment at the consultancy Public First, said their research has shown the GPP “remains overwhelmingly popular” with voters.

Alvis said his research has shown “lots of voters haven’t heard of the [£28bn]” but “when they do, they are broadly supportive”. He added that a bigger risk for Labour is the perception that the party doesn’t have a clear plan for the green transition, or that it is indecisive. “If they do a walk back from the GPP, voters will say, ‘Oh, it’s another U-turn.’” Sticking with their original plan – to invest in the growth of the green economy – shows they are serious about this.

The GPP is also popular with businesses and investors. A clear, coherent policy environment guided by a long-term strategy makes public-sector projects more attractive for investment.

Ryan Jude, programme director for green taxonomy at the Green Finance Institute said “keeping businesses and investors certain with the direction of travel” is essential. That way businesses can “make plans to invest and focus on UK opportunity rather than abroad”. In order to give certainty, Jude said, “clarifying which sectors the national wealth fund might invest in is absolutely key”, he said, referring to Reeves’s September 2022 pledge to create the £8bn fund. It is to be used by the party to grow the domestic industries that will be essential to the green transition. (At the time of writing, it remains unclear whether this commitment will receive the same treatment as the £28bn.)

Jude explained there are two specific areas that offer a key opportunity for Labour to focus on in its investment via the national wealth fund. One is in sectors such as green hydrogen or carbon capture, utilisation and storage, both of which are heavily dependent on expensive, emerging technologies and are seen by the private sector as being “too risky”. Another opportunity is to promise investment in well-established parts of the green transition “that are not scaling at the pace we need”. This includes the retrofitting of residential properties, and nationally critical infrastructure (see HS2, or the expansion of the National Grid). “The public finance solution for each is different,” Jude told Spotlight, “but these solutions need to be designed to maximise the mobilisation of appropriate private capital.”

He added that the £28bn was able to give that “confidence on the ambition – even if the figure ends up being slightly different”, but added that what is more important is the “need to deploy public capital strategically in a way that mobilises private investment”. He explained this will “protect the public finances while still raising the capital we need for net zero”.

Maya Singer Hobbs, senior research fellow at the Institute for Public Policy Research, agreed. “The number is less important than a clear commitment to investing in the green transition,” she told Spotlight, “we would argue for a clear industrial strategy that holds all of this investment together.” Singer Hobbs described Labour’s position as “tricky” because it remains unclear “what exactly the fiscal situation they will inherit will be if they win”. It therefore makes sense that they are cautious. “But that doesn’t mean you should back away from the need for investment,” she added.

It seems clear that the public finances are not able to deliver the major projects that are so essential to the green transition at scale without the weight of private capital. Take HS2 for example. The project was cancelled last year by the Prime Minister due to its unsustainable and unaffordable cost. Now, Andy Burnham, and Andy Street – mayors of Manchester and the West Midlands respectively – have taken matters into their own hands. They are currently attempting to crowd in private investment to deliver an “alternative HS2”.

Labour has often affirmed its commitment to a “just transition”. The party has assured voters that no one working in carbon-intensive industries will be left behind by the move to a green economy. The prospective closure of Tata Steel’s blast furnaces in Port Talbot and the accompanying job losses, has renewed attention on this commitment.

The job losses associated with the transformation of the steelworks might have been avoided if the UK had an adequate green industrial strategy. Boris Johnson’s ten-point plan for “a green industrial revolution”, which was first announced in the summer of 2020, is the closest the current government has got to this. But the policy did not include any plans for steel, and several of its pledges – such as its proposals to scale up nuclear energy and hydrogen – have yet to come to fruition. This absence is a clear opportunity for Labour.

Singer Hobbs said there is a need, therefore, “for some tangible proposals, and these plans for net zero need to have fairness at their heart”. That means listening to those who currently work in carbon-intensive industries – such as boiler engineers, or those working in the oil and gas industry – and involving them in decision-making and policy-shaping. “All of the people who work in those industries that are going to change and shift shouldn’t be disadvantaged,” Singer Hobbs added.

The number, £28bn, may have gone, but it’s clear that the main aims of the GPP must stay. It would be foolish for the party to further jeopardise a policy that is popular among both voters and businesses. Labour has a clear opportunity here. The UK remains without a clear green industrial strategy; a plan that will be essential to maintain and improve the standard of living of voters across the country as the disruptive effects of climate change begin to be more keenly felt. Without it, thousands of jobs, like those to be lost in Port Talbot will remain under threat.

The party must look away from the constant headlines on its U-turn, and focus on developing a clear and coherent blueprint for the green prosperity plan. If not, Labour risks losing the investment this country so desperately needs, and the patience of voters. As Singer Hobbs put it, “Without investment at scale, we’re not going to reach net zero.”

[Read more: “It’s a lack of ambition” Labour mayors urge Keir Starmer to keep £28bn and House of Lords pledges]

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