That £28 billion. We need a bang, not a whimper
This is the way the world ends
Not with a bang, with a whimper.
TS Elliot. The Hollow Men.
Rachel Reeves’s logic in rowing back from Labour’s £28 billion a year investment plan for green transition is flawed in three vital respects
- Sense of proportion. Faced with an existential threat that, as UN Secretary General Antonio Gutierez put it this week, amounts to humanity committing “collective suicide” because of our failure to act with sufficient urgency to confront it, Reeves argues that “fiscal responsibility” is more important. As if the two were counterposed. This is a bit like the purser of a sinking ship poring over the accounts and telling the captain not to run the pumps to keep it afloat, because it will cost too much. Follow that course and the books balance but the ship sinks, and we all drown; including the purser. It is also self-defeating, even within the narrow logic of accountancy. Ed Miliband has pointed out, rightly, that it is now cheaper to save the world than let it burn. If we allow ourselves to keep heading for the 2.8C increase in average temperatures that current policies guarantee, the costs, as our society breaks down, will make a timely £28 billion a year now look like a very wise investment; a snip at the price in fact. The longer we leave it, the more disasters we will face, and the more expensive dealing with them becomes; until we get to the point that they overwhelm us. Lord Stern has been making this point since 2006. Its long past time it was understood.
- Flawed comparison. Reeves is quite right to point out that the hapless Liz Truss, as the front woman for the cluster of climate change denying, libertarian hooray henrys hunkered down in the Tufton Street bunker, crashed the economy; meaning that government borrowing is now more expensive than it was. However, Truss tried to borrow to fund tax give aways for the rich- in the expectation that this would unleash the animal spirits of capital and lead to a boom. And we saw what happened. That delusion went up in smoke in less than a month. Road tested. Found wanting. This is not the same as borrowing to invest in green infrastructure – be that insulation, public transport, net zero housing, heat pump manufacture, grid connectivity, energy generation or any of the training needed to skill us up to do all this – which generates a return greater than the outlay. As long as those returns are greater than the cost of servicing the debt, the investment pays for itself. There is also wriggle room in raising more tax from the grotesque excess profits of the fossil fuel companies, and the increased wealth of the top 5% who’ve done very nicely thank you from the cost-of-living crisis that has afflicted the rest of us. As these companies, and people, are responsible for the lion’s share of carbon emissions too, clipping their financial wings is win win.
- A US model policy that does not do what the US does. Reeves claims to be basing her economic policy on that of the United States. But the United States is investing massively in domestic infrastructure through the Inflation Reduction Act. So is the EU. £28 billion a year would keep the UK at about their level. Chinese investment is on an even bigger scale than that. The full £28 billion a year is needed as a start for the UK to keep up. Reeves said, as recently as Labour conference last autumn “I will invest in good jobs in the green industries of the future, giga-factories to build batteries for electric vehicles, a thriving hydrogen industry, offshore wind with turbines made in Britain, planting trees and building flood defences, keeping homes warm and getting energy bills down, good new jobs in communities throughout Britain.” Without the investment, none of that will happen. Whole sectors will wither, as the brown industries of the past go to the wall and take their workers with them; and the potential positive impact on the cost of living crisis of lower energy bills from lower cost onshore and offshore wind energy and insulated homes will go by the board, probably meaning that this will be a one term Labour government.
Reeves has said that investment will be “ramped up” to the full £28 billion, but doesn’t give a starting point or a schedule. Ed Miliband has said that they are still committed to getting there. The problem is that having a fiscal rule largely devised for perception management that requires debt to be falling as a proportion of GDP (something they would never begin to contemplate in the USA) means that – without the upfront investment to generate a virtuous circle of green prosperity – the finances available throughout the next government are likely to remain mean and squeezed. So the ramp may be so long and shallow that we never get to the end of it; and what investment becomes available will no longer be in the framework of an overarching plan – that the private sector can take confidence in generating investment from them too – but the sort of penny pinching, short term bits and bobs initiatives that we have become accustomed to under the Tories; which get a smaller bang for a buck, because there is neither continuity nor certainty nor confidence, nor economies of scale.
So, we are in a situation of damage limitation. While we have to have this argument that the whole strategy is flawed, we also have to try to nail down what exactly is on offer within it and push it to go further.
There is a commitment to some investment. The argument being that it will take time to ramp up training and supply chains.
So, we need to know how much is the bottom line that will be sustained come what may. We need a commitment to a bedrock figure to have any certainty at all that any progress can be sustained, even at a low level. How much is envisaged as going in to what in the first year?
The most logical approach is to go for those areas with the quickest and biggest impact first, both on carbon emission and the cost of living.
Increasing grid connectivity is an obvious one – so projects already built and pending can start getting cheaper energy through the grid within months rather than years.
Unblocking onshore wind is a complete no brainer. It’s the cheapest from of energy, quick to erect and will have an almost immediate impact.
Putting what limited funding the Treasury is willing to release into relatively expensive nuclear energy and maintaining the current government’s funding for CCUS looks likely; but will be both costly and suck investment away from other areas that will generate more of a return.
Is the £6 billion pledged for home insulation sacrosanct? If so, what is the plan to roll it out? If anything is to be achieved at all in the first year, plans need to be in place to, for example, train retrofitters, set up DLOs through local authorities working with FE colleges, schedule orders for insulation materials on a long-term basis- so suppliers can get organised to produce them on time at the quantity required. Each local authority area needs a local just transition body with community and union involvement to plan what can be done – and what could be done.
The involvment of every union in this planning is crucial. As TUC General Secretary Paul Nowak put it in his recent Guardian interview .“This is not about me or the TUC or a few union leaders. What trade unions bring to the table is a network of tens of thousands of union reps up down the country that can be actively mobilised to help shape what this green future will look like. That is a resource that no government should ignore and no employer should ignore.”
If seriously planned this could be presented concretely in every constituency, stating how many jobs will be created, how many homes insulated and on what time scale. This would be popular, and it could happen, if Labour can be bold enough to grasp the opportunity.