Sir Keir Starmer has performed a major U-turn on one of Labour’s key economic policies, as the party delayed plans to borrow £28bn a year for a green investment pledge.
Labour rowed back on its flagship “green prosperity plan”, which promised to pour £28billion per year into climate-friendly investments until 2030 if it wins the next election.
Rachel Reeves - who said she wanted to become Britain’s “first green chancellor” - said that Conservatives “crashing the economy” had triggered the “embarassing” rethink.
But Tory critics accused the party of “flip-flopping”, claiming it was another Labour plan that “does not add up”. And Chancellor Jeremy Hunt said Labour’s plan will still add £100bn to the national debt and “fuel inflation”.
Pressed on whether the £28bn figure was no longer realistic, the shadow chancellor said Labour will instead “ramp up” to that level of investment by halfway through a first parliament.
“We will get to the £28bn, it will be in the second half of the first Parliament. But we will get to that £28bn,” she told BBC’s Radio 4 Today programme.
Ms Reeves said in the last two years “the Tories have crashed our economy”. “As a result, interest rates have gone up 12 times, inflation is now at 8.7 per cent,” Ms Reeves told the BBC.
She denied being “frightened of the bond markets”, insisting that the U-turn shows “Labour can be trusted with the public finances”.
Ms Reeves added that everything Labour does in government will be “built on a rock of economic and fiscal responsibility”, adding: “I will never be reckless with the public finances.”
She added: “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 promise - which is Labour’s biggest spending pledge and would amount to a total of £140bn in borrowing - had come under fire over fears the scale of the borrowing would drive up interest rates.
The plan also raised questions about whether the party would stick to its so-called fiscal rules. Labour has promised if elected to bring down debt as a share of total economic output.
Mr Hunt said: "This superficial change from Rachel Reeves still adds around £100billion to our national debt - meaning higher mortgages for families and higher debt interest bills for taxpayers.
"A responsible approach should tackle inflation, not fuel it."
And Greenpeace UK said watering down the pledge was a “huge mistake” for Labour which could cost thousands of jobs.
Head of politics Rebecca Newsom said: “This prevarication… risks throwing in the towel on the global race in green tech, with the US, China and the EU already far ahead.”
Tory MPs lashed out at Labour over the U-turn, with Conservative chairman Greg Hands claiming Sir Keir's economic policy was "in tatters". "Even he and Rachel Reeves realised it would lead to disaster," he said.
Mr Hands said Labour's pledge would lead to higher inflation and higher interest rates.
He added: “The Conservatives are taking immediate action to fix the problems families are facing, while putting in place the long-term solutions to build a stronger and more innovative economy that will guarantee a better future for the next generation.”
Craig Mackinlay told The Independent: “Sir Keir’s flip-flops are certainly out for the summer with the barely two week old £28Bn ‘Green Prosperity’ plan ditched.
“Green and prosperity are two words which do not sit together. Not only would the new spending add to national debt, it would be inflationary and entirely wasteful.
“Voters do not believe it and do not want to pay for it. Controlling economies never ends well.”
And Henry Smith told The Independent the decision showed “confusion and chaos” and claimed Labour “does not look like a government in waiting”. Mr Smith said: “Scrapping a flagship green investment project policy which would’ve committed £28 billion is a massive and embarrassing U-turn for Labour to make and damages their credibility.”
Ms Reeves insisted former Labour leader Ed Miliband, now the shadow net zero secretary, was “on the same page” as her.
And Mr Miliband said the party will “never back down” on borrowing to invest in green technologies. “Britain needs this £28bn a year plan and that is what we are committed to,” he said.
Labour’s climate change secretary said he, Sir Keir and Ms Reeves are “determined” to stick to the plan, working up to the £28bn target in the second half of a Labour term in government.
Meanwhile senior Labour MP Darren Jones, chairman of Parliament's business committee, said Labour "still has a green prosperity plan".
"This is about implementation, not a u-turn or watering down of policy," he stressed.
He added: "The last time a government rushed public spending it resulted in dodgy contracts for Ministers mates."
