Robert Peston@Peston
Labour’s famous or notorious £28bn - its promise to spend £28bn a year on climate-friendly investment - is set to be consigned to the dustbin of history, probably within days.
The policies underlying that original £28bn pledge - to convert all power generation in the UK to zero emissions by 2030, to build a new state-owned power company, Great British Energy, and so on - will be retained.
But the collective annual cost of these investments will not be sold to voters as any single number, and certainly not £28bn - because that simple single number is being exploited by Rishi Sunak in a campaign to prove that a Labour government would be reckless and profligate.
Labour’s leader Sir Keir Starmer and his shadow chancellor Rachel Reeve’s have progressively softened the promise in recent weeks - by saying that the full £28bn would only be spent at the end of the parliament, and therefore not from the off, that it would include spending already being done by the Tory government and that it would not be spent if there was a forecast breach of the fiscal rule that debt must be falling within five years.
Even so Starmer and Reeves feel vulnerable to Tory attacks that they plan to borrow more than is affordable and would thereby force up market-priced interest rates for all of us. Despite Labour’s massive lead in the polls, Starmer is modifying any policy that could alienate important workers.
A senior Labour source said: “Rachel [Reeves] is quite clear that it’s the green initiatives that matter, not the symbolism of £28bn. That’s why it makes sense to ditch any part of the policy that can be abused to damage us.”
It is thought that the two Starmer appointees most intimately involved in election preparation, shadow cabinet-office minister, Pat McFadden, and campaign director Morgan McSweeney, both wanted to bin the £28bn commitment - whereas the shadow energy-security minister Ed Miliband has been “digging in”, according to a source, to preserve the £28bn.
The price tag was originally announced by Reeves in 2021 at Labour’s conference, as proof that she would be as bold in retooling and “greening” the economy as the US president Joe Biden has been with his more ambitious Inflation Reduction Act.
But since then the economy has slowed, government borrowing has remained elevated and interest rates have soared, which is why orthodox economists are concerned that the public finances may be seen by international investors as shaky if a government were to add £28bn to the annual borrowing bill.
That caution from the economic establishment about the £28bn will only be reinforced after the IMF tomorrow publishes what are expected to be gloomy forecasts for the outlook for the British economy and the public finances.
Later this week Labour is holding a conference for private sector companies. Some business figures, especially in the renewables sector, say they are desperate for stability from any future government, and that they would be concerned if ditching the £28bn was a sign Labour can be blown off course by perceived short-term electoral advantage.
