Energy Sector Is Frustrated By Uncertainty Over Labour £28bn Green Spending Pledge
Labour has pledged to spend £28bn a year on green energy by the end of the next parliament. (Alamy)
6 min read
Labour has been warned that scaling back its £28bn Green Prosperity Plan would send the wrong message to investors who are already frustrated with the lack of consistency from government on messaging over net zero.
In 2021 Labour originally pledged to invest £28bn per year in green energy as part of its Green Prosperity Plan. Proposals include creating green jobs, insulating homes, building low carbon infrastructure, and setting up Great British Energy if they win the election, due this year.
A number of powerful economies globally have spent significant amounts on green energy and technologies, including the Inflation Reduction Action (IRA) in the US, a $369bn investment by the President Joe Biden's government.
Labour's plans were warmly received by the energy sector, with a poll of international green energy investors commissioned by the Labour Climate and Environment Forum (LCEF) in September finding 78 per cent of respondents said they believed the proposals would bring more opportunities to UK businesses than risk. 73 per cent of investors also said government-led investment in renewable resources will drive a similar or increased level of private sector investment.
However, since then the shadow chancellor has watered down the plans, with Rachel Reeves saying the figure is now a target the party will work towards by the second half of the first term in parliament, if fiscal rules allow.
The change in tone follows repeated attacks by the Conservatives, who already appear to have made criticism of the £28bn price tag a cornerstone of their election strategy. During a press conference on Rwanda legislation on Thursday Prime Minister Rishi Sunak segued onto the topic, claiming "the Labour party can't tell you how they're going to pay for" the pledge.
On Friday afternoon, the party said it would stick with the £28bn pledge "subject to fiscal rules" after The Sun reported Labour insiders had told the paper it planned to ditch the promise following Conservative attacks over the cost.
"We are committed to Labour's Green Prosperity Plan to drive growth and create jobs, including our plan to ramp up to £28bn of annual investment in the second half of the parliament, subject to our fiscal rules," a spokesperson said reponding to the story.
Adam Berman, deputy director at Energy UK – whose members represent around 80 per cent of the UK's power generation – told PoliticsHome Labour should stick with their £28bn pledge as it was key to attract investors to the UK in a time when the international landscape is becoming more competitive.
"We're acutely aware that the transition to clean energy is going turbocharge the British economy, that it's going to power net zero, that it is going to power the economy of the future – and so we're really positive about any plans that are that are able to accelerate that transition and are able to move us faster in the direction of cheaper bills, and have more energy security," Berman said.
"In terms of the £28bn the announcement itself, it's really important for investors that any government keep their commitments as certainty is the most important thing that investors are looking for: these really long term infrastructure projects which are often in place for 25, 30, 40 years – particularly if we're thinking like things like nuclear projects."
Berman also said private sector investment is crucial to reach net zero, and that consistent messaging from Labour on the issue was vital given the UK government's mixed messaging on the issue.
Last year the Conservative government made the controversial decision to push back the phasing out of new petrol and diesel vehicles from 2030 to 2035. They also set out intentions to "max out" the UK's oil reserves in the North Sea to bolster UK energy security despite its net zero commitments.
Earlier this month senior Conservative MP Chris Skidmore, who previously led the government's review on net zero, stepped down from his position as an MP in protest of the government's approach to net zero and its Offshore Petroleum Licensing Bill – which would allow more new oil and gas licences in the North Sea.
"It's very clear that about 70 per cent of all the money needed for net zero is coming from the private sector," Berman added.
"We want politicians to focus on how to unlock more of that private sector investment, rather than assuming it all has to be public spent – and we've been very interested to see the Labour party's views on how to ensure that any investment from the public sector could lead to a significant multiplier in terms of private sector investment."
Adam Bell, a former government energy adviser and director of policy at Stonehaven consultancy, also felt Labour should not water down their plans on energy further.
"I have a lot of sympathy with Labour's quandary here, because we know that the Conservative strategy is going to be to present Labour as effectively a risk – and they want to harp on this £28bn because it's additional spending in a time of fiscal troubles on something they will argue is not necessary," Bell told PoliticsHome.
"Labour needs to retain their position as the party of fiscal rectitude in order to maximise their majority, but at the same time, they also need to ensure that they do have a plan to actually grow the economy so that at the next election, they're able to say: 'look what we've done, the country is in a better place than when we arrived'."
Bell also believed investors are seeking consistency on messaging from Labour amid mixed messaging from the government.
"Labour do need to ensure that the UK once again becomes an attractive place for capital," he added.
"Quite frankly right now the UK is regarded as, I'm not going to say a 'basket case'... [but] if you talk to fund managers, they will say things like, it's very hard to argue for investment in the UK right now; the £28bn can help change that.
Earlier this month, Labour leader Keir Starmer told the BBC that it was "absolutely clear" that the "Tories are trying to weaponise this issue" of the cost of the Green Prosperity Plan.
"This is a fight I want to have," Starmer told Sunday with Laura Kuessenberg. "If we can have a fight going into the election between an incoming Labour government that wants to invest in the future, long term strategy that will lower bills and give us energy independence, versus stagnation and more of the same under this government... I’m absolutely up for that fight.
A former shadow minister told PoliticsHome they believed Labour would stick with the Green Prosperity Plan because "everybody else is doing it".
"Labour needs to be clear on how much money private sector will the Green Prosperity Plan will be able to get mobilised for every pound of public sector investment," they said.
"And the second thing they need to be clear on is how they going to ensure the workforce is there for the Green Prosperity Plan without changing immigration rules."
A Labour source told PoliticsHome investors behind the scenes were "tearing their hair out" with the government's inconsistency in messaging on green policies.
"The private sector is ready to go, but they just don't know what to expect from this government anymore," they said.
"And that means they look at the USA where the inflation Reduction Act is taking off, they look at Europe - where they've got a big green investment programme – and think: 'we'd rather go that'.
"So our whole Green Prosperity Plan has been redesigned to invest into this country, so they invest in energy and in green technologies, so they have confidence that this is a good place to invest in."
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