Since being first announced in September 2021, the Green Prosperity Plan, which aims to increase green investments by £28bn a year by the second half of the next parliament, has gone through various changes. This investment will be spent on projects such as developing offshore wind farms and batteries for electric vehicles. Furthermore, the Labour Party has pledged that every pound invested in clean energy production by the government will be matched by £3 of private investment.
However, in June 2023, Shadow Chancellor, Rachel Reeves said that the entirety of the £28bn would not be spent on day one of a Labour government. Reeves cited the poor economic outlook and soaring costs of borrowing as reasons for delaying the investment. Sir Keir Starmer, the Labour leader, confirmed in January 2024 that the investment would be increased over time and reach its peak of £28bn per year after 2027. However, the party has also stated that they will spend less if the amount of borrowing needed would break their self-imposed fiscal rules.
Ben Zaranko, from the Institute for Fiscal Studies, argues that the current UK government has already pledged around £10bn of future climate-related investment. Therefore, Labour’s Green Prosperity Plan depends on an extra £18bn annually, rather than the proposed £28bn.
The Conservative party has criticised the plan, with Prime Minister Rishi Sunak stating in Parliament on 15 November 2023 that it would “push up inflation”. Laura Trott, the chief secretary to the Treasury, has also argued that it would lead to tax rises, and Home Secretary James Cleverly claims it would “saddle people with a £28bn debt”.
It is currently difficult to assess the full impact on the economy, since Labour has yet to present a detailed plan on how they will pay for the green investment. Diane Coyle, a Professor of Public Policy at the University of Cambridge, argues that borrowing money to invest is not necessarily a bad thing. The investment’s success will depend on whether it results in higher economic growth and potential tax revenues. However, Ben Zaranko of the Institute for Fiscal Studies points out that previous UK governments have struggled to invest the amounts that they have pledged, thus emphasising the importance of how the money is spent
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