UK needs ambitious green plan to keep up with allies, says Labour frontbencher

Britain needs its own ambitious green investment plan to keep up with its allies, a Labour frontbencher has said, amid an increasingly bitter row over whether Keir Starmer should stick to his £28bn pledge.

Jonathan Reynolds, the shadow business secretary, said the UK should come up with a version of Joe Biden’s $369bn (£290bn) Inflation Reduction Act, which has provided support to a range of technologies including electric cars and renewable power.

Speaking from Davos, Reynolds warned that the UK risked losing business to the US if it did not commit to a significant plan of its own, even as some around the Labour leader said it would risk damaging the party in the polls.

As Labour officials race to finalise the main manifesto commitments in time for its 8 February deadline, the fate of its green prosperity plan remains one of the main unanswered questions.

Reynolds’s comments will bolster the arguments of those who have urged Starmer not to drop it in the face of a sustained Conservative attack.

Reynolds said Biden’s act was “probably the most significant disruption to investment capital markets in 40 years – a greater impact than the pandemic and the global financial crisis … we’ve got to respond to that. We’ve got to increase our competitiveness, we’ve got to understand there’s a huge offer there from the US.”

Labour officials will meet this week to discuss the £28bn promise, and further meetings are planned between shadow ministers in the coming weeks.

Some in the shadow cabinet believe the policy, launched in 2021, should be ditched given that the UK faces much higher borrowing rates and Labour is desperate to avoid making unfunded spending commitments.

However, others say the policy is the party’s main economic and environmental offer to voters and that dropping it will only intensify accusations that Starmer cannot be trusted to keep his promises. Like Reynolds, they make the point that the UK could lose business to the US if it fails to come up with its own version of the US act.

“What’s so significant about the Inflation Reduction Act is, they have recognised that if you just do it in the cheapest way … that’s going to be Chinese,” he said. “This [the act] has been a huge disruptor, sucking away from Europe a whole range of exciting companies and technologies.”

Reynolds said the precise sum mattered less than what it was being spent on. “We’ve the same view as Rachel [Reeves] and the [shadow] Treasury on this,” he added.

His words echo the recommendations of a group of leading economists, who said in a paper on Monday that Britain should invest £26bn a year in the low-carbon economy rather than using the money for tax cuts.

David Lammy, the shadow foreign secretary, said over the weekend the party was sticking to the policy, after a report in the Sun that it would be dropped. But he added it would not spend the full £28bn if economic circumstances did not allow it.

Matt Wrack, the head of the Fire Brigades Union, told the Guardian the public would be at risk if a Labour government did not follow through on its investment promises, given the increasing number of floods and wildfires to which his members are having to respond.

“If Labour doesn’t spend this money, it will put our members at risk. But it will also put communities at risk, especially in areas which are at risk of wildfires or major floods,” he said. “It will increase the strain on the fire service and the risk to firefighters.”

Among those making the decision over the party’s green policies are two shadow cabinet ministers whom Starmer has asked to “bomb-proof” the manifesto so that it does not fall apart in an election campaign.

The Labour leader has asked Jonathan Ashworth to see how the proposals will withstand media and opposition attacks, and Lucy Powell to check whether they will be able to form coherent legislation.

Their roles mirror that played by David Miliband for Tony Blair before the 1997 election, when the young policy chief was tasked with making sure that the party had not made any promises that it could not defend from opposition criticism.

If Powell and Ashworth sign off individual policies, they will be checked by Rachel Reeves, the shadow chancellor, to see if they have been costed, before getting the final signoff from Starmer. Ravinder Athwal, the Labour leader’s policy director, is in charge of writing the manifesto.

Shadow cabinet ministers have been told to have their headline policy proposals ready by 8 February, even if finer details need to be ironed out at a later date.

As policy officials continue to wrangle over the fate of the £28bn green plan, Reynolds said the party remained committed to “a degree of public investment and bringing in private investment”.

But he also warned against making short-term decisions that could have negative long-term consequences. “Growing up in the north-east in the 1980s, I know what getting a transition wrong looks like. This is about getting it right,” he said.