Labour waters down £28bn green investment pledge to protect fiscal credibility

Labour has watered down plans to spend £28bn a year on green investment after internal tensions over Labour’s flagship economic policy.

Writing for The Times, Rachel Reeves, the shadow chancellor, said that soaring interest rates and her “non-negotiable” pledge to reduce government debt every year meant the spending commitment would not now be fulfilled until the second half of her party’s first term.

“The truth is I didn’t foresee what the Conservatives would do to our economy,” Reeves told BBC Radio 4’s “Today” programme. Therefore, she would now ramp up investment over time from a 2024 election win, reaching £28bn a year after 2027.

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However, the climbdown follows “a period of intense internal debate over… the opposition’s ‘green prosperity plan’”, said The Times in its news report on the decision. Sources close to the Labour leadership told the paper that the £28 billion had become an “electoral deadweight” and had been “vastly overtaken by the cost of borrowing”.

In a tweet seen as a sign of tensions within the party, Ed Miliband, the shadow climate and net zero secretary, wrote this morning that “Keir, Rachel and I” remain “committed to” the £28 billion plan.

Labour unveiled its plan in 2021, recalled HuffPost. At the party’s annual conference that year, Reeves said: “I will be a responsible chancellor. I will be Britain’s first green chancellor.”

The “green prosperity plan” was the largest single spending pledge Labour has made, said the i news site, but the party has “faced a number of questions over whether it can meet its spending targets without raising taxes”. Analysis by the news site claimed that it would have to increase the basic rate of income tax by 3p to pay for the changes it wants.

The Conservatives rubbished Labour’s decisioin. “Keir Starmer’s main economic policy is in tatters, after even he and Rachel Reeves realised it would lead to disaster,” said Tory chairman Greg Hands.