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Labour leader Sir Keir Starmer is set to announce on Thursday that the party is abandoning its target to spend £28bn a year on green investment after weeks of confusion about the flagship policy.
Starmer is poised to use a set piece event to drop the £28bn figure from Labour’s “green prosperity plan”, blaming the worsening public finances under the Conservative government. “There will be an announcement tomorrow,” said a Labour spokesperson.
Several party figures confirmed Starmer would rein in the scope of what until now has been his most expensive and most ambitious policy, with Labour proposing to borrow billions to invest in green industries.
The U-turn is awkward for Starmer given he was using the £28bn figure as recently as the start of this week in an interview with Times Radio.
But other senior Labour figures, including shadow chancellor Rachel Reeves, had stopped citing the number in recent weeks.
Reeves, asked 10 times about the £28bn annual spending target at a business event last week, refused to stand by it.
It was Reeves who pledged in 2021, when interest rates were close to zero, that a Labour government would borrow £28bn a year for green capital spending.
The party was emboldened when US President Joe Biden subsequently introduced his ambitious Inflation Reduction Act, which funnelled huge amounts of public subsidy to low-carbon industries in America.
But with interest rates having risen sharply to tackle a surge in inflation, Labour became nervous about the financial implications of its green prosperity plan.
The party had already scaled back the policy, partly by saying it would gradually work up green spending to £28bn a year by the end of the first term of a Labour government.
Reeves also announced the policy would have to comply with Labour’s fiscal rules, under which public debt as a proportion of gross domestic product must be falling after five years.
Despite those changes, Prime Minister Rishi Sunak and other ministers repeatedly claimed that Labour’s green prosperity plan represented an irresponsible amount of extra debt when public finances are already strained.
The plan includes the creation of a state-owned energy company to invest in renewable power, a £6bn-a-year insulation programme for homes, and a “sovereign wealth fund” to oversee the decarbonisation of British industries through measures such as extra funding for green steel and gigafactories.
Starmer is expected to insist on Thursday that Labour will press ahead with many of these proposals, including the state-owned energy company and the sovereign wealth fund.
However, Labour has scaled back the home insulation programme by saying the £6bn annual figure will not be reached for five years and is subject to the party’s fiscal rules.
Starmer has been urged by several influential Labour figures to rein in the size of the green prosperity plan, including election co-ordinator Pat McFadden and campaigns chief Morgan McSweeney.
But some shadow ministers, including energy spokesperson Ed Miliband, have sought to keep the plan in place, saying it was one of Labour’s most distinctive policies.
