Rachel Reeves has confirmed that Labour’s flagship plan to borrow £28bn a year to fund green investment has been scaled back.
The shadow chancellor told BBC Radio 4’s Today programme that should the party win power, it would “ramp up” spending to meet the target by the mid point of the next parliament. Reeves first made the pledge in her 2021 Labour conference speech, promising “an additional £28bn of capital investment in our country’s green transition for each and every year of this decade”.
But in her interview, Reeves said the UK’s worsened economic outlook had forced a change of position. “The truth is I didn’t foresee what the Conservatives would do to our economy,” she said, in reference to Liz Truss’s mini-Budget last September. “Maybe that was foolish of me.”
The U-turn followed persistent speculation that Keir Starmer was prepared to water down the £28bn pledge amid intense Conservative and media scrutiny of Labour’s fiscal plans. During a shadow cabinet meeting earlier this week, Reeves and Pat McFadden, the shadow chief secretary to the Treasury (who I recently profiled), warned colleagues against making unfunded spending commitments following a series of front pages questioning Labour’s plans.
[See also: It’s hard to be a “tree-hugger” but progressive politicians must try]
This will be viewed as a blow to Ed Miliband who, as shadow climate change secretary, has championed Labour’s interventionist agenda on cleaner technology. Reeves did emphasise though that she, Starmer and Miliband were “on the same page”. A source close to Miliband said he and Reeves were “in complete lockstep”.
The shadow chancellor avoided explicit references to the £28bn pledge during her recent trip to Washington DC and New York, where she met senior Democrats and US economists. Jason Cowley joined her on that American trip for this week’s New Statesman cover story. Referencing the £28bn promise, he presciently noted that “Reeves spoke to me about it only in abstraction; it could be that it has already been dropped”. She also, tellingly, remarked: “The green prosperity plan will only be possible if we have an iron grip on public spending and tax receipts.”
Labour figures are keen to emphasise that the investment plan has not been abandoned altogether. It has simply been delayed. But Reeves, who has vowed her party would only borrow to invest and reduce Britain’s debt burden, was unable to say how much Labour aspires to spend in its first year.
After blaming the Tories for “crashing the economy” and forcing higher interest rates, Reeves said that “economic stability, financial security, always has to come first and it will do with Labour. That’s why it’s important to ramp up and phase up our plans to get the investment we need to secure these jobs so that it is also consistent with [Labour’s] fiscal rules to get debt down as a share of GDP and to balance day-to-day spending.”
Labour’s climate plan aims to create jobs in green industries and mirrors some of the commitments in Joe Biden’s landmark Inflation Reduction Act, which includes $375bn of subsidies for green industries. But some insiders believe the party struggled to explain the concrete benefits of the programme and feared losing Labour’s hard-earned economic advantage as the next election draws closer.
The U-turn has angered the party’s left, with Momentum calling it “hugely disappointing”. The organisation added: “We will never tackle the climate and social emergencies before us if we water down our policies at the first sign of attacks by the Tories and right-wing press.”
[See also: Rachel Reeves: Labour’s plan for power]
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