Labour faces left and right backlash as £28bn green plan survives but delayed

Labour has rowed back on its pledge to invest £28bn a year in the transition to a green economy, with Rachel Reeves announcing that the party in government would instead ramp up investment over time to reach the annual total.

The move follows growing political pushback from the right and even within Labour against the party’s environmental agenda in recent weeks. But the watering down of one of its most distinctive and radical policies has already sparked another backlash, with anger on the left.

Writing in the Times today, the Shadow Chancellor stressed the party’s continued commitment to its green prosperity plan, which she described as “vital” to its mission of securing the highest sustained growth in the G7.

But Reeves highlighted the changed economic situation since she first announced the plan at party conference in 2021, including rising interest rates and the impact of Liz Truss’ government’s “disastrous” mini-Budget.

She wrote: “My commitment to Labour’s fiscal rules, including ensuring debt is failing, has always been non-negotiable – and it will remain that way. Within that framework of fiscal responsibility, it [is] right to borrow to invest, not for unfunded tax cuts or day-to-day spending, but to build the economy of the future.”

Shadow Climate Change and Net Zero Secretary Ed Miliband – a key advocate for the green prosperity plan – tweeted following the announcement: “Some people don’t want Britain to borrow to invest in the green economy.

“They want us to back down. But Keir, Rachel and I will never let that happen. Britain needs this £28bn-a-year plan, and that is what we are committed to.”

Rowback amid right-wing backlash and party jitters

The announcement follows a fierce backlash in the right-wing press, and reports this week that the future of the plan itself was in doubt. The Financial Times reported on Tuesday that some party figures were starting to wonder if the proposal was still affordable, given increased borrowing costs and the need to invest in public services.

Meanwhile according to a Times report on Thursday, Keir Starmer had been urged to water down the spending commitment, with the increased cost of government borrowing having provoked fears within the party that the plan would be portrayed as reckless in the run-up to a general election.

A source close to the leadership told the Times: “It has been overtaken by the vastly increased cost of borrowing. It is not popular on the front bench. It has not achieved any electoral resonance.”

In her piece for the Times today, the Shadow Chancellor argued that the “right way” to deliver the party’s plans is to “ramp up the investment over time reaching a total of £28bn a year in the second half of the parliament at the latest”.

Reeves said it was necessary to take this approach “to make sure there is time to build the supply chains we need, skill our workforce and ensure the taxpayer gets value for money”. She argued that it was also the “fiscally responsible choice”.

Joe Jervis, director of Renaissance – a group chaired by frontbencher Stephen Kinnock and committed to making Labour “electable again” – said the Shadow Chancellor was “right to balance fiscal responsibility with need for investment, after 13 years of Tory decline”.

“Key to this is showing how our green jobs policies will pay for themselves – versus the cost of doing nothing,” Jervis added.

Luke Murphy, associate director of the Institute of Public Policy Research think tank, said it was “good to see Labour remains committed” amid political pressure. He argued that “smart”, long-term investment boosts growth more than it raises debt, and was different to former Prime Minister Liz Truss’ borrowing to fund tax cuts.

Left of party hit out at ‘disappointing’ backtrack

But the change in stance means the party now faces outcry of a different kind, this time from within Labour and the wider left.

One backbencher said recent “briefing and counter-briefing” among shadow cabinet members over the plans had been “unacceptable”, but added: “The leader needs to make an unequivocal statement that we will fund a bold green transformation rooted in working communities from day one.”

A Momentum spokesperson described the move as “a hugely disappointing step backwards”. The left-wing campaign group also argued that Miliband’s tweet looked like a “thinly-veiled statements of public defiance”.

Another backbencher told LabourList that figures on the right of the party were trying to “gut the party of any progressive agenda”, also explaining the “unprecedented attacks on party democracy” seen in selection contests.

Former Jeremy Corbyn adviser Andrew Fisher tweeted that “the arguments for this watering down really don’t stack up”, adding: “People can turn on the news and see investment in tackling climate change can’t wait.

“They can look at other countries and see that it isn’t waiting there. And what if another global economic crisis hits in 2024 or 2025? Will it be delayed again?”

Reeves’ mission to be ‘first green chancellor’

Reeves pledged at conference in 2021 that Labour in government would put £28bn of capital investment towards the transition to a green economy for each year of the decade, declaring that she would be “Britain’s first green Chancellor”.

She told delegates: “I will invest in good jobs in the green industries of the future. Giga-factories to build batteries for electric vehicles. A thriving hydrogen industry. Offshore wind with turbines made in Britain.

“Planting trees and building flood defences. Keeping homes warm and getting energy bills down. Good new jobs in communities throughout Britain.”

At party conference last year, Labour outlined plans to end the use of fossil fuels in the UK’s power system by 2030, establish a new national wealth fund to invest in partnership with the private sector and create GB Energy, a publicly-owned clean energy company.