Labour has reneged on its pledge to invest £28 billion annually in green industries if elected, citing the need to be "responsible" with public finances. Labour pledged in 2021 to spend £28 billion annually on green initiatives until 2030, funded by borrowing.
Rachel Reeves, the shadow chancellor, stated that if she won the election in 2024, she would gradually increase investment until it reached £28 billion per year after 2027. She advised sources not to be "reckless" with their expenditures.
Ms. Reeves stated that the Conservatives "crashed the economy," adding that "financial stability must come first" after prices and interest rates rose. In an effort to curb inflation, the Bank of England has raised interest rates, making borrowing more expensive, in response to factors such as the conflict in Ukraine.
Last year's mini-budget proposed by former prime minister Liz Truss, which included billions of pounds in unfunded tax cuts, also caused financial market turmoil and a further increase in interest rates. Ms. Reeves stated that the truth is that she did not anticipate what the conservatives would do to the economy. She mentioned that the necessary investments will be made, however, it must be done in a responsible manner.
When asked how much investment there would be in the initial year of a Labour government, Ms. Reeves declined to commit to a figure, stating that the economic context would not be clear until closer to the time.
Ms. Reeves stated in her 2021 announcement of the party's Green Prosperity Plan that the £28 billion would be borrowed and spent on projects such as offshore wind farms and the development of batteries for electric vehicles. Since then, the economic landscape has undergone a significant transformation, with interest rates and borrowing costs skyrocketing.
Labour aspires to be perceived as economically credible, and privately it was questioned whether the £28 billion investment was affordable in the current economic climate. According to a senior Conservative source, it was not surprising that Labour had diluted down its pledge.
They said that the pledge was made when interest rates were rock bottom. Borrowing £28 billion per year for ten years would exacerbate inflation and force the Bank of England to increase interest rates further. This represents the height of irresponsibility.
The source added that there were "still issues with the pledge" and "a significant amount of deadweight costs where the private sector would have invested regardless."
Stephen Flynn, leader of the SNP in Westminster, described the move as "the latest in a long line of broken promises" from Labour, which "could have very real and damaging repercussions for Scotland's green energy potential." Environmental activist group Greenpeace stated that a U-turn would be a grave error.
The group's director of politics, Rebecca Newsom mentioned that without necessary immediate investment they will lose out on the creation of thousands of jobs required as they phase out fossil fuels. The agreement that Prime Minister Rishi Sunak reached with the United States during his visit to Washington this week was also criticized by Ms. Reeves.
Plans for a comprehensive free trade agreement have been abandoned, but the new proposals include granting access to US green tax credits and subsidies for British electric car manufacturers.