Keir Starmer is the master of dropping pledges without suffering political consequences. Labour’s U-turn over gender self-identification last year was quietly slipped into a Guardian article. The “ten pledges” that Starmer made to the Labour membership to win the leadership contest were mostly jettisoned without fuss. The promise to increase taxes on the top 5 per cent of earners disappeared with a mutter about the tax burden. Scrapping Universal Credit became a promise to “fundamentally reform” it. But what about Labour’s promise to invest £28bn a year into the green economy?
This one is different. All signs suggest that Labour does intend to boost green investment. The policy has not been quietly dropped. Ed Miliband’s position as shadow net zero minister on Labour’s front bench looks secure. However, since it was announced by Rachel Reeves in her 2021 party conference speech, the pledge has been diluted and redefined. Last summer, the commitment to spend £28bn a year became a promise to reach that amount in the second half of the next parliament.
Some in Labour argued that this simply reflects how long it takes to initiate large spending projects. The survival of the £28bn pledge has remained a source of resentment among some shadow cabinet ministers (who feel as if the policy means money is being withheld from their briefs) and a target for Conservative attacks on “Labour borrowing”.
In response, Labour has emphasised that the £28bn pledge must comply with its fiscal rules (most notably, to reduce the national debt as share of GDP) and that it includes existing green investment by the government (currently £8bn).
Then, just before Christmas, the Guardian reported that the policy could be further scaled back, with some senior figures pushing for the £28bn promise to be dropped entirely. Hence the excitement when Starmer spoke about the policy today (4 January).
In a Q&A with journalists following his New Year’s speech, he said that the £28bn pledge “will be subject to our fiscal rules. That means that if the money is from borrowing – which it will be: borrowing to invest – but the fiscal rules don’t allow it, then we will borrow less.”
Confirmation, then, that the £28bn figure might not be reached. The excited responses were overdone: we already knew that any green investment would be subject to the party’s fiscal rules, meaning the end total might fall short of £28bn. Since Labour announced those rules – no borrowing for day-to-day spending and reducing debt as a share of GDP – all policies have been subject to them.
What was interesting was how Starmer tried to imply that he had no choice, as if he has no control over the fiscal rules. This is a sleight of hand. Labour could decide to loosen them to create space for that investment. The rules are self-imposed; Starmer and Reeves are free to amend them as required.
Labour may end up doing so. That could be the intention behind the ambiguity surrounding their exact definition. It’s not clear whether the rule on debt reduction, for instance, applies on a rolling five-year basis or by the end of the next parliament, or whether Labour will extend the time horizon to allow for long-term policymaking. Labour will probably want to maintain that ambiguity until the true state of the economy it could inherit becomes clear.
The risk with this strategy, however, is that Labour fails to win a genuine mandate for higher spending before it gets into office. Political capital is in short supply these days: if Labour intends to upturn the fiscal consensus then it will need to win this argument in advance. The alternative, of course, is that it maintains the fiscal status quo.