The Chancellor of the Exchequer would like you to believe that investment is bad for the UK. From X, formally known as Twitter, to the despatch box, Jeremy Hunt has attacked Labour’s plans to borrow to invest in green infrastructure, claiming it amounts to an irresponsible “spending spree”. But as the polls clearly show, the public is just not buying it. Not as people sit in their cold, energy inefficient homes, delayed trains, and over-priced buses.
He’s not fooling the steelworkers and community of Port Talbot, who now face the collapse of their livelihood due to the government’s failure to plan for, or invest in, the future of UK steel. Nor is he convincing the myriad experts who have formed a growing consensus on the urgent need to ramp up investment in decarbonisation.
Unfortunately, Hunt’s anxiety about public spending is, it would seem, now seeping into Labour’s own thinking. The briefings and counter briefings regarding the party’s promised £28bn-a-year green capital investment commitment feels like more than just skittishness about Tory attacks. One suspects some are finding it more difficult than expected to ditch not just Tory but New Labour economic dogma as well.
Faced with criticisms from a Conservative government now more unpopular than the Boris Johnson one it replaced, Labour should be boldly setting out its vision. A vision about how judicious public investment will future-proof industry, revive our economy and make our homes, workplaces and communities safer, more pleasant places to be. Instead, Labour hesitates – emboldening its detractors and sending mixed messages to the electorate and the private investors it needs to leverage in behind it.
Labour’s so-called fiscal rules, like Labour’s pledge to reduce debt as a percentage of GDP by the end of the next parliament, are no excuse either. They may well be called “rules” but they’re actually political choices, constructed to project whatever the government of the day wishes them to. In the last 16 years, we’ve had multiple sets of fiscal rules. By seeking to hide behind these, Labour makes the mistake of treating them like the laws of physics.
Meanwhile, the actual laws of nature – those which explain how burning fossil fuels disrupts our previously stable climate – are deemed optional. The economy and the environment do not exist in separate spheres. Fiscal rules that insist they are of nature will be left flapping in the inevitable climate storms. Such impacts are already being felt in the UK. Climate change has been the biggest driver of food price rises in this country since the beginning of 2022, with high energy prices the second-biggest factor. In recent months, drought has increased shipping costs and threatened global trade because there is not enough water in the Panama Canal.
We are only at the start of an era of unprecedented disruption and uncertainty. Ending the age of fossil fuels, supporting people through the transition, and adapting to the impacts of climate breakdown are now the primary tasks of any government. The longer we delay action, the harder it becomes, and the more people suffer – but 15 years on from the last Labour government’s landmark Climate Change Act, we are still without a real framework for how to achieve this monumental transformation.
Labour’s £28bn-a-year green prosperity plan is a crucial step towards creating that framework. Its promised investment in green steel, home insulation and electric vehicles can provide the long-term certainty that industry has been crying out for – but only if it has the courage of its convictions. Beyond these headline pledges, climate action means investing in comprehensive walking and cycling infrastructure, the circular economy, nature restoration and a more localised food system, as well as ensuring local authorities have the funds to decarbonise their own areas. In fact, we should view £28bn a year as a floor, not a ceiling.
The alternative is further economic decline, but with climate and ecological force multipliers. Such demise will inevitably fall first on those on low and middle incomes. Those least able to absorb the increasing costs that climate change will impose on the economy – at least 5 per cent of GDP a year, forever, according to the Stern Report. Surely the raison d’être for any Labour government is to look out for the interest of these particular groups?
One only has to look at continental Europe to see what happens when bold, social-democratic approaches to a green transition are not pursued. Germany’s riots and protests against its own green transition did not occur because climate action is unpopular, but rather because of who was forced to pick up the bill.
What we are witnessing in Germany and beyond is the failure of governments to grasp the need for redistributive policies to accompany decarbonisation measures, so that people struggling with the rising cost of living don’t fear being asked to shoulder costs they cannot afford. Those fears are now being exploited by the right-wing populists and the far right. Cue Nigel Farage and Reform UK, and witness the terrifying rise of Germany’s Alternative for Germany party, now polling above 20 per cent.
If Labour gets the green transition right, it can offer widespread, meaningful work within thriving local economies. But this is not inevitable. Promises of GDP growth, which is now mostly captured by the richest, must not be used to dodge the issue of who benefits from investment. We need a comprehensive Green New Deal that brings water and energy infrastructure back into public ownership, recognises the central role of public services in a fair transition, and rebalances our economy away from big corporations and towards local businesses and cooperatives. This is how wealth could be retained in our communities, instead of being siphoned away for the benefit of distant shareholders.
All this would pay for itself: in tax revenue from the jobs created, in public health benefits, and in the higher proportion of wealth retained locally. Some of the £700bn saved in tax-free ISAs could be put to work via new green ISAs, which would be invested in renewable energy, heat pumps and public transport, while providing a return guaranteed by the government.
As John Maynard Keynes remarked, and as my Green New Deal Group of colleagues have long argued, “we can afford what we can do”. The challenge is not how to find the money for a Green New Deal, but rather the productive capacity to deliver it in time. That means building the skilled workforce to deliver it, and understanding how to manage major infrastructure projects successfully – another area where our current government has an appalling track record.
As I see in my Norwich South constituency, it’s hard to overstate the depth of people’s anger and disillusionment with this Conservative government, but also with politics in general. And if one of the most unpopular, right-wing governments of modern times is replaced with a Labour government that also fails to deliver meaningfully for them, then more extreme and populist alternatives may well be sought.
In other words, the time for caution and adherence to a failed, 60-year-old economic orthodoxy is well and truly behind us. Now, Labour should be the party to never let a crisis go to waste. You don’t get bigger than the climate crisis. Labour’s finest hour could yet be ahead of it.
[See also: Labour should learn the right lessons from Bidenomics]
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