Economic picture ‘different’ to when Labour made £28bn green pledge – Reeves

Shadow chancellor Rachel Reeves said the economic picture is “very different” to when Labour set out its green investment plan as she refused to repeat her party’s £28 billion spending commitment.

The senior Labour figure said her party’s so-called green prosperity plan was “so important” but it had to be approached in a “way where the numbers add up”.

She told LBC the “fiscal inheritance” was “very different” from when the pledge was announced, claiming the UK’s economic outlook was “dire” after former prime minister Liz Truss’s mini-budget in 2022.

Under its plan announced in 2021, Labour promised to invest £28 billion a year until 2030 in green projects if it came to power.

It has watered down the pledge in recent months and the Opposition was forced to deny claims this month that it had axed the proposal.

On Sunday, shadow business secretary Jonathan Reynolds described it as an “ambition”.

Labour leader Sir Keir Starmer has previously hinted he could scale down the investment given the financial picture he would inherit if he became prime minister.

Ms Reeves offered similar sentiments during an LBC phone-in on Monday evening, saying the “economic inheritance for the next government is going to be dire”.

She accused Rishi Sunak’s Conservatives of enacting a “scorched earth” policy to “leave the worst possible inheritance” for an incoming government in terms of the economy.

Jonathan Reynolds
Shadow business secretary Jonathan Reynolds called the £28 billion pledge an ‘ambition’ (Maja Smiejkowska/PA)

The former Bank of England economist said: “If you look at the things that have happened since that (2021) announcement, the most key moment was Liz Truss’s mini-budget which put pensions in peril, sent mortgage rates soaring but also pushed up the costs for government of borrowing.

“The Government is spending something like £120 billion just serving debt interests.

“So the truth is the fiscal inheritance of an incoming Labour government is going to be very different from when I first set out Labour’s green prosperity plan.

“I don’t get to choose the inheritance — I have to live with whatever is bequeathed, if we have the opportunity to form the next Labour government.

“And all of our plans will be within those rules.”

She pointed out that further economic changes could be coming in the Budget in March and potentially during a second fiscal event before the next general election, which is expected in the autumn.

The shadow chancellor added: “All of our policies are subject to the fiscal rules and those fiscal rules are that we will not borrow for day-to-day spending — that would be irresponsible.

“But we will also get debt down as a share of GDP (gross domestic product). Debt is now twice as high than when the Conservatives came to office.

“Then, subject to those things, we will invest in the green hydrogen, carbon capture and storage, offshore wind, tidal energy, small modular reactors — all of those things that we know we need to do if we are going to get the jobs and the investment in Britain, get down people’s bills, and also meet our commitments to getting to net zero.

“I’m really excited about the opportunities, but we have to do it in a way where the numbers add up.”

Ms Reeves did not repeat the £28 billion figure during her responses to questions during the phone-in.

Laura Trott, the Conservative chief secretary to the Treasury, suggested Ms Reeves’ “scorched earth” comment hinted at tax rises under a future Labour administration.

She said: “Once again Labour show that tax rises are in their DNA.

“Labour claimed they backed our tax cuts. But now Rachel Reeves is saying tax cuts are ‘scorched earth’ as an excuse to try and wriggle out of Labour’s disastrous £28 billion of unfunded spending.

“Labour may say anything to get elected, but they can’t say what they will actually do because they don’t have a plan.

“The only way Labour will make their sums add up is through thousands of pounds of higher taxes on working people.”