Labour has reversed course on its £28 billion green prosperity plan, claiming that if it wins the next election, “economic stability” must come first.
The Opposition, according to shadow chancellor Rachel Reeves, cannot commit to spending amounts until it is evident what kind of financial crisis it would inherit.
If elected, the party has pledged to invest £28 billion annually until 2030 in green projects.
However, Ms. Reeves said on Friday’s Today program of BBC Radio 4 that this figure would be a goal to strive for in the second part of a first parliament.
She said after the Tories had “crashed our economy,” leading to soaring interest rates and high inflation, it would be crucial to show “responsibility” with borrowing.
Ms. Reeves seemed to acknowledge that the plans ran the risk of frightening the markets, much like Liz Truss’ disastrous mini-budget had.
She refused to say how much investment in the plan there would be in the first year of government, saying: “I will never be reckless with the public finances.
“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 shadow net zero secretary, Ed Miliband, was “on the same page” with Ms. Reeves, she said.
The Tories attempted to emphasize that Labour’s ultimate goal remained to attain the £28 billion number, which they claimed would harm the economy, and claimed that shadow ministers had realized the strategy would result in “disaster”.
Conservative Party chairman Greg Hands said: “Keir Starmer’s main economic policy is in tatters, after even he and Rachel Reeves realised it would lead to disaster.
“It doesn’t matter if they try and pretend otherwise, Labour’s plan remains to stick £28 billion of borrowing on the Government credit card which will lead to higher inflation and higher interest rates.”
As the opposition party’s response to Joe Biden’s clean energy-promoting Inflation Reduction Act, Labour’s centrepiece green prosperity plan includes commitments to invest more in initiatives like wind and carbon capture.
But according to Ms. Reeves, the party has always placed a high premium on its fiscal rule, which requires debt to be dropping as a share of national income after five years.
Asked whether the commitment potentially could have got into Labour into “the same difficulties” as Ms Truss last year, she replied: “Which is why I always said our fiscal rules would always be non-negotiable because they are the rock of stability upon which everything else is built.”
The prime minister’s journey to Washington, when he and US President Joe Biden announced a deal to strengthen ties between the two countries, was also criticized by the shadow chancellor.
Although hopes for a comprehensive trade agreement have been given up, the two leaders’ new “declaration” includes agreements to provide UK businesses access to US green tax incentives.
Ms Reeves, who visited the US herself last month, said she was “staggered” that Mr Sunak had returned with “no industrial plan for Britain”.
Following Labour’s setback, analysts cautioned that the UK is likely to lose out on future investments in crucial industries like green hydrogen as companies instead look to the US and EU to support the expansion of clean energy.
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU), said: “Since the Inflation Reduction Act was passed nearly a year ago, spades have hit the ground in the US, but the UK’s been stuck in the mud.
“Whichever party is in charge in the coming years will have to prove why organisations should invest here compared to the US or EU, and with the global race heating up, there’s really no time to lose.”
Prospect, a trade union representing engineers and scientists, echoed the concerns, with deputy general secretary Sue Ferns saying: “It is not only just about the total investment, which of course is important, but also about giving investors, companies and the workforce long-term certainty. This is something which the current Government have failed to do.
“Any proper plan must put developing the skilled workforce that we need, and making sure that no communities are left behind as we transition to clean energy, front and centre.”