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Keir Starmer and Rachel Reeves have consistently put the clean energy transition right at the centre of Labour’s economic offer, arguing that a big scale-up of investment in the climate transition would drive economic growth, rebuild industrial heartlands, improve energy security, and lower bills for households. But with the Conservatives already mounting multiple attacks a day on Labour’s investment plans, and strategists expecting this focus from the Tories will only grow during the heat of this year’s election campaign, the jitters at the top of the Labour Party have been widely reported.
Jeremy Hunt is expected to go-ahead with major tax cuts on March 6th that will use up some of the fiscal headroom Labour might have otherwise inherited and been able to use to pay for their energy investment plan. This will force the issue further. The Telegraph reported yesterday how “Government sources have indicated that they want to frame a vote for Labour as a vote to increase borrowing” and The Sun asked, “Could this cost Labour the election?” Sunak clearly hopes so as his New Year messaging doubles down on this line of attack despite little evidence it has had any effectiveness in denting Labour’s poll leads. (In fact, since Sunak’s Net Zero pivot at the end of last year his numbers only got significantly worse.)
Nevertheless, it's only natural that Labour’s top brass should fear the potency of a 1992-style Tory attack centred on the ideas that taxes could rise under Labour to pay for borrowing. Many in the Shadow Cabinet, like the party’s candidates preparing their campaign literature, seem to be waiting for a signal from the top as to whether Labour will, ultimately, stick to their guns. In the coming days or weeks Starmer and Reeves will want to end the speculation with a definitive answer one way or the other.
A hole where there was a plan for growth?
If Sunak does successfully spook the Labour leader into a massive green flip-flop, it will raise big questions about Labour’s broader economic and energy security strategy, which would likely open up new fronts for the Tories campaign. Having made investment in the transition the centrepiece of their plan for growth, abandoning the position would prompt questions over what alternative plan they have to kick-start the economy. As Alastair Campbell has argued, "Labour should make their green plans a big part of the campaign to come, because if they do win, putting them in place will be a big part of the growth agenda to which they are pledged... Labour need to be out there loud & proud on this."
By contrast, the very real chilling effect Sunak’s Net Zero speech had on investment in the UK could be worsened by a similar Starmer wobble. As Starmer himself often likes to say: business needs certainty and confidence to invest. What will it say about Labour’s commitment to a partnership with the private sector if a commitment core to at least two of the Labour leader’s ‘5 missions’ is abandoned at the first sign of political pressure?
After Sunak’s rowback in the autumn, EY downgraded Britain as a destination for private investment in low-carbon and a Bank of England ratesetter said his move could worsen inflation. That was in response to largely symbolic moves by Sunak, more about vibes than the fundamentals of his policy framework. For Starmer and Reeves to change their headline £28 billion “first green Chancellor” pledge would be both substantive and symbolic. A signal of that size to investors and international partners that the potentially incoming administration lack commitment to investment in this area would only risk worsening Britain’s economic troubles. It would also raise to the fore the question of what will fill the hole left by what was once the centrepiece of Labour’s plan for growth and industrial strategy.
Less help for households struggling with cost of living?
A flip flop from Starmer and Reeves could also risk giving legitimacy to Sunak’s attack on Labour over cost of living and Net Zero. As Tony Blair’s former adviser John McTernan wrote in the FT, “There is no avoiding transition. The question is how the changes will impact the public. That is where Labour must be bold and ask: “Who do you trust to make the right changes for our country — and make them fairly for working people?” A key advantage Labour have right now is the promise to voters that they will offer financial help to households and businesses to unlock the financial savings available from going green by assisting them with the up-front investments required to get there. Removing these investments will make it much, much harder to help people with the transition. McTernan is right that it would be a “huge and historic error” to drop this commitment. As the OBR put it: the cost to the public of not achieving Net Zero could be literally double the cost of achieving it.
Citizens Advice estimates reducing investment in home insulation, one of the major priorities of Labour’s current investment plan, leaves bill payers on the hook for billions of pounds in higher energy bills over the next few years. The ECIU has similarly calculated how a Sunak-style go-slow would raise the cost of living by billions. Labour have promised, as Boris Johnson did, to ramp up investment in insulating homes to reduce people’s exposure to these higher costs and argued this will reduce family bills by £1400 a year. Cutting back or abandoning this pledge would, by Labour’s own admission, leave millions of households in colder homes and paying higher bills.
Polling guru John Curtice reckons the public get this, with more believing Sunak’s green slow down would worsen the cost of living than help alleviate it.
A hole in Labour’s energy security plans?
One of the main arguments Starmer has made to turn Britain into a clean energy superpower is that it will “free ourselves from the manipulations of Vladimir Putin and petrostates.”
Sitting behind Starmer’s ambitious goal to achieve carbon-free power by 2030 is the investment plan, and in particular the idea for a National Wealth Fund and a new public energy company, GB Energy, for “investing alongside the private sector in gigafactories, clean steel plants, renewable-ready ports, green hydrogen and energy storage.”
If Starmer and Reeves chop back or abandon their green investment package, it will prompt questions of how they still intend to deliver the main elements of this wider energy security strategy to cut Britain’s exposure to risky and expensive gas imports.
This could be especially risky at a time when our vulnerabilities are in the spotlight due to the ongoing conflicts in Ukraine and the Middle East and the impact they’re having on global gas prices.
Renewed questions over the Labour leader’s true convictions?
Likely more decisive than all of these other factors will be what Starmer and his team believe that swing voters will make of all this in the next few months as the campaign hots up.
More in Common’s Luke Tryl believes Labour’s green investment plan offers an opportunity for Starmer to address one of the biggest apparent problems with his brand, which is that over half of voters don’t know what he stands for and that the widely held perception he flip flops and doesn’t stick to his promises. Tryl says Starmer’s green investment plan is popular across almost all segments of voters and that he could suffer an electoral hit from any perceived watering down of his plan including a hit to his personal brand.
Pollster Steve Akehurst tested the resilience of Labour’s arguments to the main Tory attack lines and concluded, “If the electorate at large only hear escalating Conservative anti messages, it could be a problem. On the other hand, if they hear a confident, united Labour case first, the opposite is true. That is always more easily said than done in an unfavourable media environment, but it is possible. The worst place to be in is to keep the policy but awkwardly hope it never comes up.”
Public First’s Sam Alvis believes that to shore-up support for their investment plan Labour should be “setting out how the money will be raised, how it will be spent (not on what) and using some of the money for more traditional retail politics.”
Ultimately, Starmer and Reeves may decide the most politically advantageous position would be to raise the funds for their energy investment package through measures like a toughened up and extended windfall tax on the huge profits of oil and gas firms and banks, which could remove the need for borrowing to pay for the plan. (Just this week the Spanish Prime Minister announced he would pursue just such an approach.)
But the most radical option of ditching the green investment plan would almost certainly backfire politically, and not just because it would blast holes in Labour’s wider proposals on security, the economy, and reindustrialisation.
Sam Freedman is right that, “The political difficulties of imposing specific costs on voters can’t be ignored… The far bigger political danger, though, is being caught on the wrong side of a visibly growing problem and looking complacent or blind to the risk. It’s true that it’s not a problem Britain can solve by itself, but politicians giving the impression of helplessness rarely plays well. The public might not know the policy detail; but they know that climate change is a major long-term risk to their own families and communities, and are waiting for leadership. Any politician who, looking at the data we have, concludes it’s all too difficult and people are unpersuadable, is in the wrong job.”
Great blog Joss, succinctly summarising the arguments in favour of the green investment plan! Building on some of the voter opinion arguments and backing up Luke's work, I think that there's evidence of a more general desire from the electorate to see more investment across the board in the face of widespread problems and failing infrastructure - with green investment one of the most popular areas for this. https://www.ipsos.com/en-uk/seven-in-ten-britons-think-country-not-doing-enough-to-meet-its-infrastructure-needs-prioritising-water
I get that Labour want to spike a Tory attack line - but I think in the face of public opinion, Tories arguing AGAINST investment at a time of failing infrastructure ultimately makes them look crass and uncaring and strengthens Labour's electoral offer.