Labor is considering scaling back ambitious plans to borrow £28bn a year to invest in green jobs and industries amid fears the Conservatives will use the policy as a central attack line in the general election campaign.
The Guardian understands that Keir Starmer and Rachel Reeves will discuss the party’s flagship economic policy next month, with senior Labor figures pushing to ditch the £28bn commitment altogether, while others want to keep key elements of the plan.
Labor officials say they intend to keep central parts of their green policy but want to reshape it in a way that allows them to stop talking so much about what it costs and instead focus on what the policy will do reach.
One insider said some were worried about how a Labor government would grow the economy without the green plan, and whether it could be politically damaging for Starmer as it could leave him open to charges of “flip-flopping” by the Tories.
But they added: “There will be a pivot in the new year and the £28bn price as it stands is unlikely to survive. Whatever ends up happening will be a further dilution of the position . This will be the Tories’ number one area of attack, so they have to deal with it.”
It comes after Reeves in June delayed plans for the green fund to start in the first year of a Labor government, saying it would “push up” by the middle of a first parliament as the party leadership sought to rein in its spending. to review in an effort. to prove its fiscal credibility.
Many Labor officials are annoyed that they have to defend the £28bn figure without being able to say how the money will be spent. Reeves has already focused on the outcomes of the investment, rather than its costs, which she did not mention in her Labor conference speech this autumn.
Even Ed Miliband, the shadow energy secretary, accepts that the party needs to move away from talking about the cost of the scheme and talk about its benefits.
One way to refocus attention on the scheme, one shadow minister said, would be to package the existing plans into one bill with a title that could mimic the Inflation Reduction Act in the US. “We could call it the ‘Bringing Bills Down Act,'” the person said.
However, others believe that recognizing the scheme will not be enough, and want the overall financial commitment to be scaled back, perhaps dramatically. Labor insiders said they included Pat McFadden, the shadow Cabinet Office minister; Morgan McSweeney, Labor campaign chief; and the shadow minister of the exchequer, Spencer Livermore.
The plan is already hampered by the fact that Reeves has said it will only be achieved if it matches Labour’s pledge to reduce debt as a share of gross domestic product at the end of a five-year period. Her team emphasized that the fiscal rules are extremely important.
After the autumn statement, there is an extra £13 billion to spend while still meeting the target, but the government is expected to eat into it with further tax cuts in the spring budget.
Labor said it would take into account money already committed to green projects by the Conservative government, which is around £8bn, leaving the party with a further £20bn to find out if it wants to keep the original pledge.
The party is likely to stick to the spending commitments it has already made, to fund a national wealth fund at a cost of £8bn across parliament and a home insulation scheme at a cost of up to £6bn a year.
Labor has also pledged an extra £1.4bn for a range of smaller schemes, including investments in clean steel technologies and battery power production.
Some Labor officials want the party to go no further, although those schemes, added to the money already committed by the government, would take the party to a commitment of around £16 billion a year by the end of the next parliament to spend
More money would be available through Labour’s tougher version of the energy windfall tax, which is expected to raise an extra £10.4bn a year.
The party has previously said if it were in power now it would use that money for energy price support or a council freeze. However, they have not yet said what they will use it for after the next election, leaving the funds technically unallocated.
Others in the party want Labor to be ambitious and stick to its original £28bn pledge, while spelling out in more detail how it will be spent. They point out that the idea of a publicly owned power generation company is overwhelmingly popular, win the support of almost 80% of voters.
They also point out that with rising energy costs, the party needs to make the case for clean power generation even louder.
Rishi Sunak and his ministers have already begun to weaponize the big Labor spending commitment, regularly raising it at Prime Minister’s Questions and arguing it could lead to tax increases in a move to undermine the opposition’s fiscal credibility.
