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Sir Keir Starmer has long argued his party would give businesses the certainty they need to invest in the UK. But the Labour leader’s volte-face on his green investment plan showed how hard that is, even in opposition.
On Thursday, Starmer slashed Labour’s signature promise to spend £28bn annually on green initiatives to a mere £4.7bn a year, ending months of uncertainty over the party’s commitment to the plan.
What seemed like prudent levels of borrowing when the policy was announced in 2021 was no longer the case, he told reporters. Asked if he deserve the nickname “Mr Flip-Flop”, Starmer said that was “ridiculous”.
The essence of Starmer’s argument was that circumstances had changed, with public finances and the economy both in a worse state than two years ago. Official interest rates had spiked from virtually zero to 5.25 per cent.
“You need to adjust your position when conditions change. That’s plain common sense,” he said.
The original “green prosperity plan” was announced by shadow chancellor Rachel Reeves to thousands of delighted party members at Labour’s 2021 conference. Mirroring Joe Biden’s Inflation Reduction Act in scale and ambition, the plan was by far Labour’s biggest single policy pledge.
Its dismantling, by contrast, came at a low-key briefing by Starmer and Reeves to journalists, behind closed doors in a parliamentary room and away from cameras.
The substance and style of Labour’s biggest U-turn for years demonstrated the ascendancy of cautious Blairites inside Britain’s main opposition party, as the green prosperity plan joined a long list of radical promises watered down by Starmer.
The briefing at 3pm on Thursday afternoon was the final act in what had become an increasingly painful process of gradually backing away from Reeves’s initial pledge.
For three months Starmer and other senior ministers dithered and argued internally about whether to maintain their headline promise to spend £28bn a year on the net zero transition.
Since November, various Labour spokespeople have insisted it was “categorically untrue” or “nonsense” that there would be any dilution of the policy, denying a slew of media reports about the potential retreat.
But behind the scenes, senior figures admitted the £28bn number was an “albatross” that they sorely regretted and needed to excise.
Over the past year, Reeves slowly reined in the scheme: knocking off £8bn of existing green state spending from the target and saying they would only “ramp up” towards the £28bn figure in the final year of a Labour government.
But one shadow cabinet minister expressed despair on Thursday at the “crazy” way the row over the £28bn figure had been allowed to hang over the party for months.
Starmer and his energy spokesperson, Ed Miliband, were among those party figures said to be “attached” to the policy and resistant to abandoning it.
Others, including election co-ordinator Pat McFadden and campaigns supremo Morgan McSweeney, pushed hard for the number to be killed.
“It was obvious it would have to go, but in the end it was down to the leader,” said one member of the shadow cabinet. “Keir was really attached to the policy. He thinks it’s important and didn’t want to let it go.”
Miliband was absent from the briefing to journalists on Thursday.
Starmer insisted the shadow cabinet was a sea of “smiling faces” about the final decision to demolish much of the £28bn plans.
He said Labour was retaining the policy’s main elements: a state-owned £8.3bn energy company called GB Energy; a £7.3bn “national wealth fund” to decarbonise heavy industry; and a home insulation scheme.
The Labour leader glossed over the deep cuts to that “Warm Homes Plan”, which will be reduced from £6bn a year spent on making housing more heat-efficient to just over £1.3bn a year. Much of the original £28bn had never been allocated.
Barry Gardiner, who was shadow energy secretary under former Labour leader Jeremy Corbyn, called dropping the £28bn pledge “economically illiterate”.
Starmer, he said, risked offering voters a manifesto “so bland that you stand for nothing”.
For gleeful Conservative officials, the move fed into a narrative they have sought to emphasise repeatedly: that Starmer has changed his mind on numerous policy positions since becoming leader four years ago. It is a critique shared by many left-wingers.
Starmer has so far dropped proposals to increase the top rate of income tax, to abolish tuition fees, to scrap the House of Lords completely, to nationalise several industries and to rejoin the EU single market.
Even now senior party figures are discussing other potential reversals.
The Financial Times revealed last week that some senior party figures want to water down Labour’s plans to increase the tax paid by private equity chiefs on successful deals from 28p to 45p.
Rain Newton-Smith, CBI chief executive, said the UK faced a “race against time” to capitalise on its early-mover status as a green economy with a “predictable policy environment”.
“This should be a time when we champion our net zero progress and double down on our green growth ambitions. All parties should be mindful of the signals they send out about the UK’s openness and readiness for green investment,” she added.