What are the key questions about Labour’s U-turn on £28bn green spending plan?

Labour has dropped its pledge to spend £28 billion a year on environmental projects, after months of uncertainty. So where did the figure come from and what does the U-turn mean?

 – When did Labour first pledge to spend £28 billion on green measures?

Shadow chancellor Rachel Reeves announced the party’s plans for an extra £28 billion a year in green investment at Labour’s conference in September 2021.

– What was the money going to be for?

Ms Reeves said a Labour government would “invest in good jobs in the green industries of the future”, with investment in areas ranging from giga-factories for electric vehicle batteries and offshore wind turbines, to insulating homes, planting trees and building flood defences.

At the same conference in 2021, Labour leader Sir Keir Starmer pledged the party would insulate 19 million homes over 10 years.

– Then what happened?

Labour adjusted the plan last year to say the £28 billion-a-year target would likely be met in the second half of a first parliament, rather than immediately, if the party wins the next election.

There has been growing confusion over the status of the target in recent weeks, with Ms Reeves repeatedly declining to recommit to the spending pledge, while Sir Keir said earlier this week it was “desperately needed” to achieve a fully clean power grid by 2030.

– Now what is the plan?

The green prosperity plan still has a commitment to clean power by 2030, with £8.3 billion pledged for planned public energy company Great British Energy to invest in the sector.

There is also a national wealth fund for investing in clean technology from green steel to giga-factories, with investment of £7.3 billion, and £500 million a year to boost jobs and investment in industrial communities.

There is a scaled-down commitment to upgrade five million energy inefficient homes over the next parliament, and Labour says it is doubling the Government’s £6.6 billion for insulation and clean heating with another £6.6 billion pledge.

The party also says it would introduce a “proper” windfall tax on oil and gas companies which would raise £10.8 billion over five years to help pay for its plans.

– So why did Labour abandon its flagship spending plan?

The party has blamed the Conservatives’ “crashing the economy” and Chancellor Jeremy Hunt’s “plans to ‘max out’ the country’s credit card” for the conclusion it would not be possible to reach the previous commitment of £28 billion a year.

Labour has also been determined to cast itself as economically responsible, and has said all spending would be subject to a set of fiscal rules to not borrow for day-to-day spending and get debt down.

But the £28 billion pledge also opened up an attack line for the Tories, who are languishing far behind in the polls in an election year and said Labour would have to raise taxes to pay for an “unfunded spending spree”.

The Conservatives also attacked the pledge to insulate 19 million homes, claiming Treasury costing had suggested it would cost double the £6 billion estimate.

– So dropping the pledge will make the row go away?

That is unlikely, as the Tories – who under Prime Minister Rishi Sunak have pushed back climate pledges on phasing out petrol and diesel cars and gas boilers, and insulating homes – have also used the change to attack the opposition.

They have accused the Labour leader of U-turning on major measures and of not having a plan for Government.

Labour’s disarray over the fate of the policy up to this point may also continue to haunt the party.

– How has the policy change been received elsewhere?

Green campaigners are unsurprisingly angry at the failure to deliver the £28 billion, and in particular scaling back its programme to insulate homes, with Friends of the Earth warning it was “short-sighted” and would cost the country in jobs, investment and high energy bills.

Climate think tank E3G warned the new plans, while a major increase on the Government’s, may not be enough to reach climate and fuel poverty targets and ensure the UK was internationally competitive.

What the consequences – politically and in attracting investment in the UK – are of the move to abandon the totemic figure will take time to play out.

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