Imagine this scenario. The Chancellor of the Exchequer stands at the dispatch box on March 6, Budget day, and tells the Commons he will be cutting public investment by £140billion – that’s about four HS2s – and instead would be spending £23.7billion over five years.
That is precisely what Labour has done by ditching its Green Prosperity Plan, one of the key planks of Rachel Reeves ‘Securonomics’.
Just to put the revised green investment spend in perspective, it is less than the £8billion a year which the Tories already have devoted to their own ‘Powering up Britain’ energy security blueprint.
And by the way, Labour’s new investment would be financed by a £10billion or so windfall tax on North Sea energy producers.
That amounts to far less than the UK’s two oil majors, BP and Shell, have committed to spend on zero carbon projects over the coming years. There is a risk that by imperilling North Sea oil investment and the nation’s medium term energy security, the windfall tax will lead to fewer climate change projects rather than more.
No laughing matter: Keir Starmer and Rachel Reeves have shown that nothing they say can be trusted if the biggest policy on their horizon is jettisoned so easily
Keir Starmer justifies the green change of heart on the grounds that the Tories ‘crashed the economy’. But that is not strictly true either. Yes, the Truss tantrum was a bad moment. The biggest domestic impact was on mortgage rates. They were heading up anyway as the Bank of England sought to thrash inflation.
Indeed, the housing market – as measured by mortgage approvals – and two of the biggest lenders, the Halifax and Nationwide, already is on the mend.
The real narrative is that if anything dulled economic performance it was Covid-19 and Putin’s war on Ukraine. Amid the subnormal growth among the European members of the G7 rich countries, Britain is doing better than its biggest competitor Germany.
Rachel Reeves has good reason to be cautious. Even though Labour is far ahead in the polls, the £28bn was an open goal for Tories who recognised that whatever Labour said in public it couldn’t be achieved without tax increases.
There are memories of 1997 when in spite of the public finances being in a far more robust state than at present, Gordon Brown, Ed Balls and accountants Arthur Andersen were working up secret tax raising plans to fund favoured projects.
The energy reversal will have consequences for Labour. The immediate blow is the ‘U turn’ narrative. The generally friendly Guardian felt the need to splash its front page with the headline ‘Fury as Starmer stages U-turn’.
An opinion page article by Starmer and Reeves, which talked of a ‘long term plan to invest in Britain’s future’, looked ridiculous given that Labour’s boldest project had been sent to landfill. There is a bigger problem. Reeves and Starmer have gone all out to win over the business community.
Powerful CEOs have been scrambling for access. Some observers have seen this as evidence that Boris Johnson, with his careless ‘f**k business,’ lost the commercial lobby. That underestimates how craven the C-suite can be when faced with a change of government, and says little about what it really thinks.
Most CEOs prize stability and predictability so that the much-needed investment required to boost productivity can be made.
Reeves and Starmer may believe that they are demonstrating fiscal responsibility. What they have really shown is that nothing they say can be trusted if the biggest policy on their horizon is jettisoned so easily.
Many bosses that I speak to accept the likelihood of a Labour victory but also have praise for some of the stuff Tories are doing.
Jeremy Hunt’s extension of full business expensing for plant and equipment has infrastructure investors, such as BT’s broadband provider Openreach, dancing in the aisles.
And what is Labour offering enterprise? A swingeing attack on North Sea oil energy projects, an end of tax privileges on non-domiciles which already is driving them and their potential investment funds overseas.
Without an energy revolution, the Opposition’s growth plan amounts to bulldozing planning laws so that infrastructure projects become easier and the nation gets the housing it deserves. No one can disagree with the need for that. The danger is that this much needed reform could, because of local government cavilling, become the next U-turn. Certainty has been dumped.
