It was in late September 2022, as Labour gathered for its annual conference in Liverpool, that the party’s top brass began to believe. The financial markets were in turmoil after Kwasi Kwarteng’s kamikaze mini-budget the week before. Interest and mortgage rates were spiralling as the Liz Truss experiment imploded. The pound had crashed. Members of Keir Starmer’s shadow cabinet team tried to look and sound stern as the conference opened, reflecting the public’s fears of financial meltdown and worries about its effect on the cost of living, but secretly they could not believe their political good fortune. Some of the more forward-looking among them thought that thanks to Truss and Kwarteng, one of the keys to a general election victory was now within the party’s grasp – and it was marked “fiscal responsibility”. When shadow chancellor Rachel Reeves addressed delegates in Liverpool on the Monday, she fleshed out her party’s green prosperity plan, which had been launched 12 months earlier as the centrepiece of the party’s entire economic agenda. Labour, she said, would invest in solar, wind and tidal energy to “free ourselves from dependence on Russia” and build a modern sustainable economy. She repeated two sentences, word for word, from her conference speech the year before. “I will be a responsible chancellor. I will be Britain’s first green chancellor.” But one thing – one important detail – was missing. There was no mention in the 2022 speech of the figure she had announced 12 months earlier. The £28bn a year of green investment (which she had promised would be delivered throughout the first term of a Labour government) had suddenly gone missing, as the prospect of power loomed into view.
Now, almost 18 months on, some in the Labour party believe that even then, in the autumn of 2022, Reeves was having doubts about committing so much money to the policy. “I think even then that the fiscal hawks in the party were getting to her,” said one key source. “I think they were beginning to think this could put fiscal credibility at risk.” Early last Thursday evening, after an excruciating and tortuously protracted policy row at the top of the party, which at times caused real tensions between Starmer and his shadow chancellor, Labour MPs were invited to an online briefing with Reeves and Ed Miliband.
The £28bn figure had at last just been officially declared dead and the entire plan had been sliced in half. They wanted to explain it to the footsoldiers who had been selling the plan as Labour’s big idea for the past two and a half years. Most Labour MPs were on their way home and could not tune in. But about 40 did so, and there were lively exchanges. No one bought in fully to the Reeves/Miliband show of total unity, and some were furious. Everyone knew Miliband, the shadow energy and net zero secretary, had fought to keep the £28bn intact and that Reeves had wanted to water it down for months, if not much longer. They knew too that Starmer had been uneasy about dropping it until days before the policy was dumped, fearing that if he did, people would think he did not believe in anything. The whole episode was demoralising and dispiriting, said one senior figure on the backbenches on Thursday evening. “If we can’t invest for the long term in climate change without worrying about what the Tories are going to say, then when will be able to invest in anything for the long term?” Other MPs who were present at the briefing said colleagues with strong Liberal Democrat forces in their constituencies, such as Catherine West in Hornsey and Wood Green, were particularly hot under the collar, saying they had pushed the £28bn on doorsteps for more than two years only for the mat to be pulled from under them. Plenty of Labour MPs and activists are very uneasy. If this pledge, which had formed the cornerstone of Labour’s economic and green policy, could be thrown overboard, what, they ask, will ever be sacred? And, with the party now in the final stages of drawing up a manifesto for the next general election, what, when it comes to polling day, will be left? Inevitably, after the deed was finally done, Team Starmer was quick to cast the “mother of all U-turns”, as it was rapidly (and justifiably) labelled, as merely good, pragmatic leadership.
Josh Simons, director of the Labour Together group, which broadly supports the Starmer agenda, said the move had become inevitable because of the change in circumstances since Reeves announced it in 2021. The party should be unapologetic, he said. “The £28bn made sense then. Three years, three prime ministers, and one self-inflicted financial crisis later, it makes no sense at all. So often, the Labour party has lost elections because it clung to unachievable, pious, ideological purity. Labour wins when its agenda is radical but deliverable in the world as it is. Thank God that is the Labour party under Keir Starmer and Rachel Reeves. “It’s a harder path but a braver one, which appreciates the gravity of earning the British people’s trust. And it is how you change things. The £28bn number is dead. Good riddance. Now we can talk about Labour’s ambitious plan for Britain.” To people on the left of the party, and plenty on its centre ground, that kind of thinking is precisely the problem, and typical of a right-of-centre Labour faction which claims that it alone understands and prioritises the pursuit of power. As one Labour official put it: “Those of us who believed in £28bn also believe in getting into office. They are wrong to think they have a monopoly on that.” Miliband told the Observer that Labour would “go into the next election with a world-leading climate agenda”. He added: “I am proud of our agenda and I relish the fight between Labour’s ambition and a Conservative party flirting with climate denial.”
Others are less convinced. Neal Lawson, director of the soft left Compass thinktank, who is threatened with expulsion from the party for sharing a Liberal Democrat MP’s call on Twitter in 2021 for some voters to back Green candidates in local elections, said in an essay published last week that the U-turn was symptomatic of a wider process of stifling debate and innovative thinking. “They ‘burn the village to save it,’” he wrote. “And so, an iron cage is built for any ‘victory’, not a springboard for greater radicalism.” Barry Gardiner, the former shadow energy secretary, said: “Politically, it’s strategically incompetent,” while senior environmentalists were clearly dismayed. Jess Ralston, an analyst at the Energy and Climate Intelligence Unit, suggested the UK under a Labour government could lose out in the race for green investment if it was seen to go cool on the environmental agenda: “If we want warm homes, reasonable bills, and energy independence, investment is required … There is a global economic race to build clean industries and Britain has to compete for green investment.” As rumours of the U-turn swirled early last week Paul Johnson, director of the respected Institute for Fiscal Studies, said there were no other big-ticket spending items on Labour’s list for the electorate to get excited about. “What is most remarkable about this pledge is not its scale, nor its affordability; it’s the fact that it is the only substantial spending pledge that Labour has made. It is quite the statement of priority. It has pledged next to nothing over and above the present government’s plans for anything else – health, welfare, social care, local government, education, anything.” As well as raising important issues about the substance of Labour policy, the £28bn fiasco also raises questions about the party’s processes and the chain of command under Starmer. A remaining puzzle is why Starmer continued to use the £28bn figure in interviews just days before the U-turn. Was he in a pitched battle with Reeves in which, finally, he gave in? His supporters insist not, and say that he merely stuck to the official line until the figure was dropped, rather than opting for an interim “fudge” position. (This generous interpretation ignores the fact that Reeves had clearly avoided saying the figure for some time.) But the level of indecision and confusion that had been allowed to endure for weeks and months, was, many MPs noted, off the scale. People who had worked with both Tony Blair and Starmer noted that while Blair had welcomed competing views, his own opinion on an issue was always easy to discern.
Starmer’s approach, by contrast, was more gnomic – he would hear differing opinions before retreating to make a decision, with those involved left unclear about where he might land. That, they said, explained in part the confusion that had endured for weeks. It was also due, insiders said, to Starmer’s insistence that if the figure were to be axed, Labour had to come up with a robust alternative that could not be moved again. That led to a lot of often painful meetings with various figures across the party and industry, inevitably leading to leaks. Once the move was made, there was delight at the top of the party at the BBC News alert that followed. It said Starmer had dropped the plan because the Tories had “crashed the economy”.
Internal supporters of the change are now bullish about what the U-turn allows them to do – attack the Tory economic record without being hampered by a borrowing figure they were struggling to justify. “We’ve got a platform now which we can agree on, and we can campaign on,” said one. “We’ve been able to remind people of a core part of our argument – that the Conservatives crashed the economy. Previously, we wanted to attack Jeremy Hunt after reports that he wanted to “max out” the government’s fiscal headroom with tax cuts. We weren’t able to do that because the [£28bn] figure became a distraction. Now we can.” But while that may be true, the whole fiasco has reinforced doubts among MPs and activists on the left and in the centre who were never convinced about Starmer and his beliefs in the first place: “He dropped most of the 10 pledges he made during his leadership campaign. Now he undermines his five missions by dropping this. People will have a right, the Tories will have a right in the run-up to an election, to ask: what is this guy about? What does he really believe in?” • This article was amended on 11 February 2024. An earlier version said that the Labour Together group “grew out of Starmer’s leadership campaign [in 2020]”; it was officially launched in 2016.