Saturday, February 24, 2024

Industry fury over Labour’s net-zero climbdown: Businesses warn cutting £28bn green pledge will undermine confidence in the UK market

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  • Keir Starmer announced green spending would be cut to less than £5billion 

Labour faced a business backlash over its green plans last night as it cut investment and threatened tax hikes.

In a major retreat, Keir Starmer said that planned green spending of £28billion a year would be cut to less than £5billion.

The Labour leader said his party would also ‘extend’ the existing windfall tax on North Sea oil and gas to extract another £10.8billion from an industry it has threatened to run down. 

Industry sources last night warned the move would further damage investment in the sector, where Labour has warned it will issue no new licences for exploration.

Emma Pinchbeck, of the trade association Energy UK, warned that cutting investment in the transition to net zero would undermine confidence, saying: ‘Business needs to know that politicians won’t pull the rug from under them.’

Labour leader Sir Keir Starmer and shadow chancellor Rachel Reeves, during a visit to Tilbury Freeport, Essex, in November 2023

Sir Kier Starmer pictured walking near his home this morning

Sir Kier Starmer pictured walking near his home this morning 

She added: ‘Labour’s spending plans are a signal to the market. The party has been engaging constructively with business over recent months, but retaining the confidence of the market is dependent on not making U-turns that damage the UK’s investability.’ 

Sir Keir insisted Labour would be able to keep most of its stated commitments, including £2.5billion to develop ‘green steel’ and £8.3billion to fund the creation of a state-owned firm – Great British Energy – to invest in clean energy.

But he said there would be ‘no further investment’ under the Green Prosperity Plan, which had been the centrepiece of Labour’s economic strategy. 

Sir Keir acknowledged that hitting Labour’s target to decarbonise the UK’s energy supplies by 2030 would now be ‘difficult and challenging’ to achieve, but insisted that radical reform of the planning system would encourage massive private investment to help plug the gap.

A pledge to insulate 19million homes over the next decade has also been scaled back. 

Labour had wanted to spend up to £6billion a year on the Warm Homes Plan but now aims for £1.3billion a year.

Sir Keir said the scheme might now take up to 14 years to achieve, with only five million properties completed in Labour’s first term.

Emma Pinchbeck,Chief Executive of Energy UK warned that cutting investment in the transition to net zero would undermine confidence

Emma Pinchbeck,Chief Executive of Energy UK warned that cutting investment in the transition to net zero would undermine confidence

Mike Childs, of Friends of the Earth, accused Labour of having ‘turned its back on the people who most urgently need these essential upgrades – the many millions of low-income households suffering from living in poorly insulated homes’.

The Unite union welcomed the commitment to the steel industry but criticised plans to cut back wider investment in industry. General secretary Sharon Graham said: ‘Britain needs more, not less, investment, and there is still much to do in order for Labour to gain the trust of workers impacted by net zero.

‘If Labour keep getting scared off by Tory attacks, they will end up outsourcing their policy making to the Conservatives.’

The North Sea oil and gas industry already faces an effective tax rate of 75 per cent following Rishi Sunak’s decision to impose the Energy Profits Levy to help fund subsidies for households suffering crippling increases in energy bills.

The additional tax is due to remain in place until 2028.

Labour said yesterday it would raise the levy to 78 per cent and extend it by up to two years.

Tax breaks allowing firms to offset 90 per cent of the cost of the levy against new investment will also be closed down.

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