U-turning Rachel Reeves admits flagship Labour policy would crash the economy

Rachel Reeves updates on Labour’s Green Prosperity Plan

Labour’s Shadow Chancellor Rachel Reeves has announced a major Labour U-turn this morning, after realising her party’s flagship environment policy could have crashed the economy.

Ms Reeves, who is insistent she will be responsible with the public finances unlike the last Labour government, confirmed that plans to splash £28 billion a year on green investment will be massively scaled back.

Instead a Labour Government would aim to spend that sum towards the end of their five years in Government, rather than from day one.

Speaking on the Today Programme this morning, Ms Reeves astonishingly admitted the plan as it was could have “crashed markets”, in scenes reminiscent of Liz Truss’s short-lived Government.

She told Justin Webb: “No plan can be built that’s not on a rock of economic and fiscal responsibility.

“Because if you try to do things that then crash markets, you end up in the position that [the] Conservatives [were] and I will never be reckless with the public.”

Justin Webb had to clarify with the Shadow Chancellor: “Is that potentially where we were? 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?”

Ms Reeves didn’t deny this, saying that precise concern was “why I always said that our fiscal rules would be non negotiable, because they are the rock of stability upon which everything else is built”.

Chancellor Jeremy Hunt said the policy u-turn is “superficial”, however, and would still add “around £100 billion to our national debt – meaning higher mortgages for families and higher debt interest bills for taxpayers”.

He added: “A responsible approach should tackle inflation, not fuel it.”

The U-turn will be a major blow to left-wing environmental campaigners.

Labour first announced their cash-splashing policy in 2021, however sources close to the Labour leadership had come to view the £28 billion-a-year pledge as an “electoral deadweight” that had been “vastly overtaken by the cost of borrowing”.

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Announcing the U-turn in the Times this morning, Rachel Reeves said: “To make sure there is time to build the supply chains we need, skill our workforce and ensure the taxpayer gets value for money, the right way to deliver our Green Prosperity Plan is to ramp up the investment over time reaching a total of £28 billion a year in the second half of the parliament at the latest.

“My commitment to Labour’s fiscal rules, including ensuring debt is failing, has always been non-negotiable — and it will remain that way. Within that framework of fiscal responsibility, it is right to borrow to invest, not for unfunded tax cuts or day-to-day spending, but to build the economy of the future.”

There could be tensions with shadow climate change secretary Ed Miliband over the policy change, however, with the move today being seen as a blow for him.

Rachel Reeves was at pains to emphasise his support for the new policy, however, telling Today: “Keir, Ed and me are all on the same page on this, we know that unless we have this green prosperity plan, those jobs and those investments will go elsewhere.”

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Responding to the U-turn, Net Zero secretary Grant Shapps blasted Labour, saying it was “embarrassing and screeching” but “confirms what we all knew”.

He added: “Labour has prioritised Just Stop Oil over the British economy and your family. Today they’ve scrapped plans to create jobs after Keir Starmer blew up their economic strategy and surrendered to eco-anarchists Just Stop Oil by committing to ban British oil and gas.

“This embarrassing and screeching U-turn by Rachel Reeves confirms what we all knew

“Labour are too weak to lead – their Just Stop Oil plan would mean extinction for our economy, would decimate industries, force thousands out of work and drive up bills.”

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