Labour ditches £28bn green investment pledge as Sir Keir Starmer blames Conservatives for 'crashing the economy'

The Labour party insists it is not completely scrapping its Green Prosperity Plan, but will no longer commit to investing billions on green investments

Labour has ditched its policy of spending £28 billion a year on green investments, as Sir Keir Starmer argued it would be "irresponsible" not to drop the pledge as he blamed the Conservatives for "crashing the economy".

Sir Keir confirmed the pledge, central to Labour’s flagship Green Prosperity Plan, would be drastically scaled back, with the party now set to spend £23.7bn over the course of the next Parliament.

The party’s Warm Homes Plan, a £6 billion package of measures to improve energy efficiency, is set to be one of the casualties of the climbdown, with Labour confirming it will now take longer than originally estimated with five million homes now set to be upgraded during the first five years.

UK Labour leader Sir Keir Starmer. Image: Dan Kitwood/Getty Images.

But it comes alongside plans to extend the windfall tax on oil and gas companies to the end of the next Parliament, with the energy profits levy rising to 78 per cent.

Sir Keir said: “I don’t want to have a row about the size of a cheque, I want to have a row about the outcomes.” Labour will hope the move will end speculation about the scale of the plan, as well as neutralising Tory attacks.

The £28bn plan was first introduced by shadow chancellor Rachel Reeves in September 2021, but this was then watered down in June last year to say a Labour government would meet this target halfway through its first term rather than in its first year.

Sir Keir told the BBC: “The £28bn commitment was made two-and-a-half years ago. Obviously Liz Truss then crashed the economy, that sent interest rates through the roof.

"More recently, Treasury insiders have been briefing that the government intends at the budget to max out the credit card, the government credit card, which is obviously reckless. But we have to, you know, anticipate the economy that we will actually inherit not the one that we want to inherit if we're privileged enough to win the next election.”

SNP Westminster leader Stephen Flynn said Labour’s decision would “destroy Scottish jobs, harm economic growth and hit families in the pocket by keeping energy bills high”.

He said: “It’s a weak and short-sighted U-turn, which shows Westminster is incapable of delivering the investment Scotland needs to compete in the global green energy gold rush and secure strong economic growth.

“As our parties and allies across the world press ahead with investment to attract jobs and secure economic and energy security, the UK has turned away. It’s as depressing as it is predictable.”

Mr Flynn said the U-turn was “symptomatic” of Labour setting the UK “on the path to another decade of poor growth and harmful cuts to public services”.

Pledges for Scotland made as part of Labour’s green plan had included £1 billion to modernise Grangemouth, a share of £1.8bn for Tay and Moray ports, and 50,000 clean power jobs north of the border – more than any other part of the UK.

Labour has not clarified to The Scotsman whether these pledges would remain in place.

Only last month Sir Keir described the £28bn commitment as a “confident ambition”, with some shadow ministers continuing to use the figure until only two days ago. Less than a week ago when asked about this policy by Scottish journalists, the party’s deputy leader Angela Rayner said: “No. Our Green Prosperity Fund is crucial to growing the economy.”

Sir Keir had set a deadline of today to finalise his party’s draft general election manifesto.

The Conservatives had seized on the figure as a key attack line in the run-up to a general election this year, claiming Labour would ultimately have to raise taxes to meet the “unfunded spending spree”.

But Labour’s rowback on the plan has also been attacked by the governing party, with Prime Minister Rishi Sunak saying on Thursday: “I think it demonstrates exactly what I’ve been saying, that he [Sir Keir] U-turns on major things. He can’t say what he would do differently because he doesn’t have a plan.”

The U-turn has come after the Tories claimed an official Treasury costing had suggested that part of the plan – to upgrade insulation for 19 million homes – would cost more than double the party’s estimate of £6 billion.

Unite, the UK’s second largest trade union and a big Labour donor, said the “retreat” had confirmed “workers’ scepticism of the endless promises of jam tomorrow and it will be ‘alright on the night’ rhetoric on the green transition”.

The union’s general secretary Sharon Graham said: “The Labour movement has to stand up to the Conservatives’ false accusations of fiscal irresponsibility. There is a catastrophic crisis of investment in Britain’s economic infrastructure. Britain needs more not less investment.”

Scottish Greens co-leader Lorna Slater said Labour had “betrayed our climate” as well as Scottish voters.

"This investment was urgently needed to put us back on track to meeting our climate commitments and to renew our economy,” she said. "This is a catastrophic mistake that will not be forgotten given the far reaching consequences it will have.

Areeba Hamid, Greenpeace UK’s co-executive director, said Labour had "caved like a house of cards in the wind". "It would be ironic indeed if Labour’s attempt to make their manifesto ‘bombproof’ from Tory attack ended up just bombing on the doorstep instead," she said.

The criticism comes as the EU’s climate service reveals global warming has exceeded 1.5C across an entire year. Sea surface temperatures were also the highest ever recorded.

In 2015 world leaders signed the Paris Agreement, pledging to limit temperature rises to 1.5C to avoid the most damaging impacts of climate change.