Labour gets the incumbent’s treatment on spending
You’d be forgiven for thinking that the Labour Party was about to deliver its first Budget in government with the noise over their spending pledges having reached fever pitch levels.
As speculation mounts that the much-vaunted figure of £28 billion is likely not to see the light of day in Labour’s manifesto, it’s worth recapping how we got here.
At their party conference in 2021, Shadow Chancellor Rachel Reeves committed to spending that amount every year on green investment were Labour to take office. A year later, further flesh was put on the bones through a proposed “Green Prosperity Plan”, which some saw also to be a nod to aligning with the Biden Administration’s subsidy and infrastructure-loaded Inflation Reduction Act.
Reeves even ended up later going to Washington to give a speech further laying the groundwork for a plan to better integrate government engagement with open markets in what she dubbed “securonomics”, a reflection of an economic security approach that “Bidenomics” draws much of its foundation from.
It should be noted of course that even Biden’s final plan ended up as a watered-down version of his original Build Back Better flagship policy, albeit the result of the kind of wrangling between the executive and legislature that the UK’s setup thankfully does without. But perhaps it was a foreshadowing of things to come. Neither Britain nor America can escape fiscal reality, a picture which has evolved rapidly in recent years (not least with the current government having to rebuild its credibility and fiscal reputation with financial markets following Truss’ short-lived premiership).
Reeves has been consistent in saying she wants to deliver Labour’s green spending plans through the “iron discipline” of a fiscal framework of rules, a framework that may be constructed anew by a Labour government. But those plans – or ambitions some might contend – either way have evolved. Last year, Reeves clarified that the £28 billion pledge would not be automatically implemented from the word go, but more likely in the second half of the Labour government’s term.
In recent months, you would be hard-pressed to find any mention of “28 billion” altogether by much of the shadow front bench. Keir Starmer himself was keen to stress just last December that public spending was not the only lever a government had or should pull to improve the economy, suggesting that planning reform was one such added variable that Labour were looking at. Indeed, the questions comprising the recent infrastructure [projects] review being led by Darren Jones, Shadow Chief Secretary to the Treasury, make clear that Labour are taking an end-to-end approach to policymaking.
While the Conservatives pelt the Opposition with accusations of U-turns and flip flopping, one can’t help but think that roles have almost completely been reversed. It’s now Labour who are worrying most about having a “bomb proof manifesto”, with spending commitments being given the kind of shakedown only seen at Budget delivery time.
Some might query whether the exact figure is as important as the overarching commitment which remains, to make net zero not only a destination but a plan for investment and infrastructure that underpins the UK’s economic recovery. And the importance of big numbers will always be eclipsed by the how, and some of the what: what will the breakdown of green spending be, and how [long] do they plan to take to get there?
Indeed, as we have seen recently, whether on boilers or diesel engines, what some might call pragmatism -and others capitulation- ends up kicking in. Political and even fiscal realities catch up with aspiration and ambition. But they can also put a dent in the investment plans of other players in the market, not just governments.
The reality is that for businesses and other stakeholders planning not just for now but for the long term, words still matter.