Labour's Rachel Reeves rows back £28bn green prosperity plan as Tories 'crashed the economy'

9 June 2023, 11:39 | Updated: 9 June 2023, 12:32

By Kieran Kelly

@kellyjourno

Labour has ditched proposals to borrow £28 billion a year to fund its green prosperity plan, with Rachel Reeves saying "economic stability" must come first.

Labour's shadow chancellor said the party would not commit to spending more until she has a better understanding of the financial situation her party would inherit.

Ms Reeves previously promised to invest £28 billion in green projects every year until 2030 if there was a Labour government.

But today Labour rowed back on those promises, saying that it would instead become a target towards the second half of its first potential Parliament.

Ms Reeves said the Tories had "crashed our economy", causing soaring interest rates and rampant inflation, meaning the Labour party must now show fiscal "responsibility".

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Ms Reeves said: "I will never be reckless with the public finances. Economic stability, financial stability, always has to come first and it will do with Labour.

"That's why it's important to ramp up and phase up our plans to get to the investment we need to secure these jobs so that it is also consistent with those fiscal rules to get debt down as a share of GDP and to balance day-to-day spending."

The shadow chancellor also refused to give more details on how much investment in the plan there would be in the first year of a potential Labour government.

Ed Miliband, the shadow net zero secretary and for party leader, is on the "same page" regarding the partial U-turn, Ms Reeves claimed.

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The Tories have used Labour's backtrack to criticise the policy overall, with some saying it would have led to "disaster".

Conservative Party chairman Greg Hands said: "Keir Starmer's main economic policy is in tatters, after even he and Rachel Reeves realised it would lead to disaster.

"It doesn't matter if they try and pretend otherwise, Labour's plan remains to stick £28 billion of borrowing on the Government credit card which will lead to higher inflation and higher interest rates."

Labour's green prosperity plan included promises to invest more money in projects such as wind and carbon capture.

Asked whether the commitment potentially could have got into Labour into "the same difficulties" as Liz Truss last year, Ms Reeves said Labour's fiscal rules "would always be non-negotiable".

Following Labour's rowback, analysts warned the UK is set to miss out on future investment in key industries such as green hydrogen while businesses turn instead to the US and EU to back clean energy growth.

Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU), said: "Since the Inflation Reduction Act was passed nearly a year ago, spades have hit the ground in the US, but the UK's been stuck in the mud.

"Whichever party is in charge in the coming years will have to prove why organisations should invest here compared to the US or EU, and with the global race heating up, there's really no time to lose."