Labour’s proposed investment of £28bn a year in the low-carbon economy is an absolute minimum, a leading business figure has said, adding that without green investment on that scale the UK will face steep decline as a result of crumbling infrastructure and stagnating industry.
Jürgen Maier, the former UK head of Siemens, the German industrial giant and major investor, said massive investment was needed to rebuild the UK economy and make it fit for the future, and that it should concentrate on low-carbon energy, transport and industry.
“These are the growth areas of the future,” he said. “The £28bn is not a cost, it’s an investment. If you make this investment, business will return to the UK.”
Maier is advising Labour on transport and infrastructure, and formerly gave advice to the Conservative government. He said the Tories had turned their back on business and industry, and urged Labour to stand firm on its £28bn commitment.
“Do not let populism make you waver,” he told doubters within the party. “This is the right decision for the future of this country, for the future of the communities that rely on these industrial jobs. For them, Labour need to stick to this plan.”
The shadow cabinet and Labour’s top advisers are considering whether to alter or even abandon the longstanding pledge to increase public investment in the low-carbon economy to £28bn a year in the second half of the next parliament.
The Tory party has made the pledge its key attack line against Labour, claiming that the only way the party will be able to make such investments is by raising taxes. The chancellor, Jeremy Hunt, is expected to attempt to reinforce this by cutting some taxes in the budget in March, further reducing the fiscal headroom an incoming Labour government would have to increase spending, unless it rowed back on his cuts.
The Tories also argue that their plans, which include scaling up fossil fuels by issuing more oil and gas licences, are already attracting private sector investment. Private sector investment in the UK’s low-carbon economy since 2010 stands at £200bn, with £30bn of that coming since September, mainly in offshore wind. A government spokesperson said: “This shows huge confidence in the UK, and our plans will see a further £100bn [in private sector investment] by 2030, helping to support up to 480,000 jobs.”
A Whitehall source said the government’s roadmaps on industries such as nuclear power, carbon capture and hydrogen were “providing industry with the certainty they need to back low-carbon projects in the UK”.
Maier, however, said the government needed to intervene much more in the market to attract the levels of investment needed for a low-carbon economy. He also cast doubt on its current strategy, pointing to the closure of the Port Talbot steelworks despite previous assurances that it would stay open, and failures to invest in the electricity grid, high-speed rail and manufacturing.
The Tories “have no credible industrial strategy, no investment and no growth plan. They have turned their backs on industry,” he said. “This transformation [to a low-carbon future] is clearly an area where you need intervention by government.”
He pointed to the US, where $369bn (£291bn) of investment in green industry is planned through the Inflation Reduction Act, and EU countries, which are also investing heavily. “This is global money, it’s movable money. Every other advanced industrial nation is taking a different approach,” he said.
Maier’s views were backed up by leading economists and business experts, who said that without strong investment in green infrastructure, the UK would fall behind to international rivals, lose out on jobs and experience further economic decay.
A paper by Lord Stern and colleagues from the London School of Economics found that government investment of £26bn a year would generate additional private sector investment of twice as much, as well as reducing energy bills, creating jobs and stimulating the economy. Dimitri Zenghelis, the lead author, said: “The direct public finance required to support this transition should not be expected to worsen public debt. Indeed, by facilitating long-term resilient growth, borrowing to invest is the only way to secure enduring public debt sustainability.”
Danny Sriskandarajah, the chief executive of the New Economics Foundation, said: “Labour has one shot at keeping Britain competitive against the billions that the US, EU and China are ploughing into their low-carbon economy. If Labour wants Britain to regain its international climate leadership, it should keep its promise of green investment. We should take a leaf out of America’s book and ramp up clean, green investments so we can create jobs, lift up our communities and rebuild an economy on its knees.”
Andrew Simms, the director of the New Weather Institute, said global examples showed that public investment programmes “more than pay for themselves economically and environmentally, deliver better human health and crowd in other investment”. By contrast, fiscal rules were “made-up economic nonsense” that should not be allowed to stymie much-needed investment in future prosperity.
Reneging on the pledge would be “like a person walking into a prison and demanding to be locked up in case they do something good in the world”, he said.
Without a large increase in investment, the UK would face further decline, said Shaun Spiers, the executive director of the Green Alliance. “The UK has been underinvesting for the last 45 years. The consequences are evident all around us, in failing infrastructure, costly energy and a depleted natural world.”
The Confederation of British Industry (CBI) also favours green investment but stops short of endorsing any political plans. “A defining challenge for the next government will be setting out a strategy for boosting the UK’s global competitiveness,” said Tania Kumar, the CBI’s director of net zero policy. “That requires shifting the economy’s focus away from the short-term shock absorption dictated by global events to identifying the big choices and bold moves that can define the next decade.”
She said the UK was well-placed to benefit, but that political leaders must set the pace of change. “Global investors will naturally respond to the size of the investment, and ambition here is important,” she said. “But the UK’s pitch must be how it can outsmart, not outspend its competitors. Real clarity on where public funding will unlock investable propositions alongside the market mechanisms to crowd in private finance remains the smart play that can give the UK an edge.”