(Bloomberg) -- The UK’s main opposition Labour Party scaled back its flagship pledge to invest £28 billion ($35 billion) a year on a green energy transition if it wins the next election, blaming the Conservative government for damaging the economy since the proposal was first published in 2021.
The plan now is to “ramp up” spending rather that hit the £28 billion in the first year of a Labour government, the party’s shadow chancellor Rachel Reeves said in a BBC Radio 4 interview on Friday. Labour is targeting the second half of its first five-year term, she said.
The step change in Labour’s plan is likely to draw criticism from party members demanding a bold vision for government centered around tackling climate change, but it also reflects an internal tussle over how best to persuade voters Labour can be trusted with the economy — regarded as essential to winning the next general election expected in 2024.
Reeves made clear the UK’s economy is in a different state to when the poll-leading Labour Party first came up with its green strategy, and referenced the surge in interest rates during Liz Truss’s short-lived premiership as evidence that it is the state of the public finances forcing the party’s hand.
“I’ll never play fast and loose with the public finances and put people’s mortgages and their pensions in jeopardy in the way the Conservatives have,” Reeves said. “But I’m also determined to grow the economy.”
According to an analysis by Dan Hanson at Bloomberg Economics, rising interest rates and gilt yields have punched a £9 billion hole in the UK government finances — effectively wiping out the headroom against both parties’ main fiscal rule to get the national debt falling as a share of GDP within five years.
Read More: Rising UK Rates Open £9 Billion Hole in Tory and Labour Plans
©2023 Bloomberg L.P.