Sir Keir Starmer has performed a major U-turn on one of Labour’s key economic policies, as the party delayed plans to borrow £28bn a year to fund a green investment pledge.
Labour rowed back on its flagship “green prosperity plan”, which promised to pour £28bn per year into climate-friendly investments until 2030 if it wins the next election.
Rachel Reeves – who has spoken of her ambition to become Britain’s “first green chancellor” – said the “embarrassing” rethink was a result of the Conservative Party “crashing the economy”.
But Tory critics accused Labour of “flip-flopping”, claiming it was another plan by the party that “does not add up”. And the chancellor, Jeremy Hunt, said Labour’s plan will still add £100bn to the national debt and will “fuel inflation”.
Pressed on whether the £28bn figure was no longer realistic, the shadow chancellor said Labour would instead “ramp up” to that level of investment by halfway through a first parliamentary term.
“We will get to the £28bn – it will be in the second half of the first parliament. But we will get to that £28bn,” she told BBC Radio 4’s Today programme.
Ms Reeves said that in the last two years, “the Tories have crashed our economy”. She told the BBC: “As a result, interest rates have gone up 12 times, [and] inflation is now at 8.7 per cent.”
She denied being “frightened of the bond markets”, insisting that the U-turn shows “Labour can be trusted with the public finances”.
Ms Reeves said that everything Labour does in government will be “built on a rock of economic and fiscal responsibility”, adding: “I will never be reckless with the public finances.”
She continued: “Economic stability, financial stability, 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 to the investment we need to secure these jobs, so that it is also consistent with those fiscal rules to get debt down as a share of GDP and to balance day-to-day spending.”
The promise – which is Labour’s biggest spending pledge and would require a total of £140bn in borrowing – had come under fire over fears that the scale of borrowing would drive up interest rates.
The plan also raised questions about whether the party would stick to its so-called fiscal rules. Labour has promised that, if elected into government, it will bring down debt as a share of total economic output.
Mr Hunt said: “This superficial change from Rachel Reeves still adds around £100bn to our national debt, meaning higher mortgages for families and higher debt interest bills for taxpayers.
“A responsible approach should tackle inflation, not fuel it.”
And Greenpeace UK said that watering down the pledge was a “huge mistake” for Labour which could cost thousands of jobs.
The organisation’s head of politics, Rebecca Newsom, said: “This prevarication … risks throwing in the towel on the global race in green tech, with the US, China and the EU already far ahead.”
Tory MPs lashed out at Labour over the U-turn, with Conservative chair Greg Hands claiming that Sir Keir’s economic policy was“in tatters”. “Even he and Rachel Reeves realised it would lead to disaster,” he said.
Mr Hands said Labour’s pledge would lead to higher inflation and higher interest rates. He added: “The Conservatives are taking immediate action to fix the problems families are facing, while putting in place the long-term solutions to build a stronger and more innovative economy that will guarantee a better future for the next generation.”
Craig Mackinlay told The Independent: “Sir Keir’s flip-flops are certainly out for the summer, with the barely two-week-old £28bn ‘Green Prosperity’ plan ditched.
“Green and prosperity are two words which do not sit together. Not only would the new spending add to national debt, it would be inflationary and entirely wasteful.
“Voters do not believe it and do not want to pay for it. Controlling economies never ends well.”
And Henry Smith told The Independent that the decision showed “confusion and chaos” and claimed that Labour “does not look like a government in waiting”. Mr Smith said: “Scrapping a flagship green investment project policy which would have committed £28bn is a massive and embarrassing U-turn for Labour to make, and damages their credibility.”
Ms Reeves insisted that former Labour leader Ed Miliband, now the shadow net zero secretary, was “on the same page” as her.
And Mr Miliband said the party will “never back down” on borrowing to invest in green technologies. “Britain needs this £28bn-a-year plan, and that is what we are committed to,” he said.
Labour’s climate change secretary said that he, Sir Keir and Ms Reeves are “determined” to stick to the plan, working up to the £28bn target in the second half of a Labour term in government.
Meanwhile, senior Labour MP Darren Jones, chair of the Commons business committee, said Labour “still has a green prosperity plan”.
“This is about implementation, not a U-turn or watering down of policy,” he stressed. He added: “The last time a government rushed public spending, it resulted in dodgy contracts for ministers’ mates.”
