It was September 2021 at Labour’s annual party conference in Brighton, that shadow chancellor Rachel Reeves debuted the “Green Prosperity Fund” to an atmosphere part shock, part fanfare. Having been appointed to her post in May of that year, this was Reeves’ first real introduction to the party faithful, and she was doing it in symbolically radical terms: an apparent signal of ideological intent.
Vowing to be Britain’s first “green chancellor”, she committed her party to “an additional £28 billion of capital investment in our country’s green transition for each and every year of this decade”: a full £140 billion worth of capital investment in the course of a first Labour term funded entirely by borrowing. “As chancellor I will not shirk our responsibility to future generations”, she said: “No dither, no delay”.
But still, questions surrounded the initiative from the outset. Given the remarkable reluctance with which Keir Starmer’s party had announced policy up until that point, why was this the time to pronounce upon such a vast spending commitment? Two years before Liz Truss spurred the salience of spending commitments, Starmer and Reeves still traversed the narrowest of paths in their bid to justify Labour’s economic plans as robust. The party’s green energy commitment, from the moment of its birth, was notably nonconformist.
One reading of the policy would seek to explain it by placing it firmly in the context of that 2021 fête and its preceding months. These were uncertain times for the Labour leader: Boris Johnson had vaccine bounced himself ahead in the polls and, some months earlier in May, to victory in the Hartlepool by-election. From that result flowed a botched reshuffle and an elaborate 24-word title for Angela Rayner, who — Starmer had resolved — was overdue for a reckoning. The Labour leader thought he could will his authority into existence; in the end, his intra-party constraints were confirmed.
Of course, we know now that the most substantively important move in Starmer’s May 2021 reshuffle was the elevation of Rachel Reeves at the expense of Anneliese Dodds. But this was far from clear at the time. Indeed, the new shadow chancellor was yet to make a substantial mark on public opinion when she took to the stage in Brighton. So, with this set piece address, Reeves intended to introduce herself in the clearest possible terms: she would be the “green chancellor”.
A slightly different view as to the machinations informing the GPP announcement accounts for the influence of shadow climate change secretary Ed Miliband. The day before Reeves announced the policy, Miliband himself took to that stage to, ahead of time, proffer some detail on how the £140 billion would be spent. His bespoke climate change ministry would spend £3 billion to “green” the steel industry, pursue subsidies for renewable energy and invest in electric car gigafactories, he announced. A report in the New Statesmen subsequently suggested Miliband had “strongarmed” the announcement into his speech — to some considerable chagrin in the shadow Treasury team.
What is certain: the GPP spoke — and arguably continues to speak — to Miliband’s belief that progressive parties must “Go Big” in government. The shadow climate change secretary’s ode to radicalism published in 2021, entitled GO BIG: How To Fix Our World, makes clear his point of view: the underlying message of the book was that, if Miliband could do it all again, the “EdStone” would be built some feet taller to allow space for riskier commandments.
This, in the end, was the ideological terrain that Reeves traversed — apparently enthusiastically — in her 2021 conference speech. And for months to follow the GPP continued to occupy an exalted place in Labour’s thinking as a microcosmic illustration of Starmer’s abiding ambition.
How things have changed since that fateful fête: interest rates have vaulted, Boris Johnson has gone, Liz Truss came and went, and the ideological terrain Labour feels comfortable traversing has shifted significantly.
Thankfully, by the time Liz Truss left office with politics reshaped by her failures, Labour’s policy handbook was far from overflowing with high-spending proposals. But the GPP was a conspicuous exception and, so, in June 2023, Rachel Reeves announced Labour would be watering down its commitment to the plan. She said the party now intended to “ramp up” to the totemic £28 billion figure: the party would invest over time from a 2024 election win forward, reaching £28 billion a year after 2027.
“No plan can be built that is not a rock of economic and fiscal responsibility”, Reeves told BBC Radio 4’s Today programme. The shadow chancellor added: “I will never play fast and loose with the public finances.”
Of the factors informing the updated approach, it was clear that Liz Truss’ disastrous 49 days in Downing Street featured first and foremost. So BBC Radio 4’s Justin Webb accosted Reeves: “You think if you’d stuck to the £28 billion in the first year, you potentially could have got into the same difficulties that basically Liz Truss’s government got into?”. There was no denial, instead the wannabe “green chancellor” caveated: “I always said that our fiscal rules would be non-negotiable because they are the rock of stability upon which everything else is built”.
There is a question, here, of how Labour’s policy-making agency should be considered in the thick of Britain’s post-Trussonomics politics. One school of thought would suggest that the former PM has unconsciously trapped Starmer, narrowing the Labour leader’s policy path and crippling his instinctive radicalism. (Although perhaps a thornier issue for Starmer comes with the cost of borrowing. Since Reeves first committed to the plan, interest rates have gone up 14 times from 0.1 per cent to 5.25 per cent).
But Starmer’s fiscal conscientiousness, informed by iron-clad economic oaths, is also a political choice. Naturally — and cannily perhaps — in the wake of the Conservatives’ Trussite tailspin, Labour has pilloried their opponents for plundering Treasury coffers with such reckless abandon. But the approach constrains Starmer, too, as he coheres a pitch that can be upheld, at once, as prudent and worthy of Britain’s overlapping crises.
Still, Labour’s fiscal rules are far from being so overbearing or so compellingly iron-clad to render the Green Prosperity Plan in any of its guises unworkable. Fiscal Rule three, for example, that “Labour will have a target to reduce the debt as a share of our economy”, is really a rule to have a rule sometime in the future. And as Jeremy Hunt’s gaming of his own fiscal rules in the autumn statement showed, political/ideological proposals can be forwarded based on a loose interpretation of one’s economic oath-swearing.
But Labour, in adopting the framing of the failure of Liz Truss as Starmerism’s founding moment, rendered the GPP, as it existed in September 2021, politically unconscionable. By around 10 am on 9 June 2023, therefore, with broadcast studios toured and hosts’ probing questions handled, Rachel Reeves had answered Labour’s “£28 billion question”.
In this way, Reeves was also dealing with matters at once larger still than any singular policy. For the subtext of the announcement was that Labour’s commitment to fiscal rules, now embraced as a signal of Starmer’s seriousness, will at every turn trump ideological intent.
It was a clear insight into the machinations informing Starmerism: a political methodology at once stolid and intractable, but constantly in motion — as it is honed according to what circumstance and Labour’s economic oaths jointly decree is politically and fiscally practicable. It is Starmer’s essential paradox: that purported profligacy on principle is matched by serious strategic consistency. Labour’s policy programme is always settled — but only ever for now.
With the “28 billion question” answered, therefore, the revised Green Prosperity Plan was given pride of place in Starmer’s clean energy mission. A further reshuffle in September was summarily rumoured, conducted and considered: the Blairites were roundly declared to be on the march. But an understated development was the retained status of Ed Miliband — who had been consistently sounded out in the preceding months as an individual set to be sacked. His continued status in the shadow cabinet could be viewed as Starmer doubling down on his green energy ambitions.
But nothing is ever settled in the Starmerite weltanschauung. And the autumn statement, delivered last week by Jeremy Hunt, has drastically reshaped how fiscal policy will be conducted for years to come.
The chancellor offered significant tax cuts, but pencilled in steep cuts in public spending beyond the next election. According to the Office for Budget Responsibility (OBR), Hunt’s announcements will reduce the ratio of tax revenue to GDP to 37.4 per cent in 2027-28 compared with 38.1 per cent in their absence. And the cost of the measures announced, the OBR calculates, means that post-measures cash debt will be £106.7 billion higher by 2027-28 than in its March forecast. Perhaps worse still, growth is projected by the OBR to remain weak and the share of public spending within GDP to be only just shy of 43 per cent by 2027-28.
Delivering his autumn budget to the commons, Hunt’s aggressive rhetoric matched the OBR’s daunting arithmetic. Bearing down on Reeves’ retained borrowing commitment, Hunt said: “[the shadow chancellor] said that when it comes to borrowing, she ‘will take it up’ by £28 billion a year. Indeed, she has opposed every decision we have made to reduce our borrowing. The government will bring borrowing down, because, as the late Lord Lawson said, borrowing is just a deferred tax on future generations”.
In response to Reeves’ despatch box retort, Hunt honed his argument: “Her main policy is a demand-side boost to growth, increasing borrowing by £28 billion a year, with absolutely no plans to repay it”.
Now, that the chancellor wilfully misrepresents Labour’s stance on the GPP is perhaps evidence that Reeves was right to respond with her rearguard action in June. But that the chancellor still views Labour’s green commitments as Starmerism’s soft underbelly is significant. It was considered the primary target of his autumn offensive.
Of course, fiscal flippancy is a charge not received lightly in Labour circles; and with Hunt having pencilled in steep curbs in public spending beyond the next general election, there remains the question of how Labour will manage the economy within these additional constraints. “Long Hunt” looks set to haunt Labour’s policy offering for some time.
On cue, it seemed, reports written in the aftermath of the autumn statement suggested Labour could once more water down its Green Prosperity Plan. One source told the Telegraph that “The fiscal rule matters more, and that will dictate how much is in the green prosperity fund”. The BBC reported, similarly:
“It is unlikely a Labour government will be able to meet its ambition to spend £28bn a year on green initiatives, a source close to Sir Keir Starmer has told the BBC.”
The reports were met with immediate criticism, including from what could be considered unlikely sources. Onetime Tony Blair strategist John McTernan wrote on X (formerly Twitter): “Shameful retreat, if true. Labour needs to have ambitions, not abandon them”.
The furore prompted a quick rebuttal from party HQ as a Labour spokesperson rubbished the reports as “categorically untrue”. While all plans are subject to fiscal rules, it was made plain, the party’s position on the green prosperity plan remained “unchanged”.
But the clarification serves in one sense to confirm that the GPP can only exist as part of Labour’s policy platform if Reeves’ fiscal rules decree it.
It takes us, once more, to Starmerism’s central dilemma: how does Labour reconcile its radicalism, epitomised by its climate ambitions, with its stolidity, conditioned by the collective memory of Trussonomics, Conservative attacks, a perilous economic inheritance and now Hunt’s fiscal trickery?
In short, can Rachel Reeves be both an “iron chancellor” and a “green chancellor”?
Hunt and the Conservatives know that Labour’s messaging on a rigid fiscal framework is so overbearing that it only takes one slip-up, one nonconformist breach to undermine all the party’s work. Thus, the door for a further Labour climbdown on its climate commitments, disavowal notwithstanding, remains well and truly open.
Another point to make is that there is a potential failure here at the centre of Labour’s messaging on the GPP. A common critique of party figures in favour of the proposal in its former guise argued that Starmer had not done enough to articulate what he would do with the money. In this way, it is clear that the policy mirrors Biden’s approach to green investment in the US — but compare the framing. The US president sold his climate subsidies plan on firmly economic lines, evinced by his plan’s innocuous and shrewd title: the Inflation Reduction Act. Starmerism, conversely — as it has been configured post-Truss — has plainly struggled to make the case for its flagship policy.
It would be significant — and in some senses surprising — therefore, if the GPP makes it all the way to an election in its already-revised guise. That is, unless, the Labour leader seeks to approach the inter-party debate on fiscal policy anew, a move which would signal a newfound boldness in his political approach.
Thus, the prospect that Labour could “Go Big” after an election remains after Hunt’s autumn statement. But, for Starmerism, shaving off difficult policies tends to be rather easier than making the case for them.
Josh Self is Editor of Politics.co.uk, follow him on Twitter here.
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