Labour’s decision last week to drop its £28bn green investment commitment was disappointing, but what was really concerning was its use of the tired old phrase “maxing out the country’s credit card”.
Keir Starmer and Rachel Reeves have used this to justify scaling back spending on things we not only need but will help our economy overall. It is an orthodoxy has crept into our collective thinking and informed the economic policies of successive governments since 2010, particularly on the imposition of austerity.
While it is clearly important to manage public finance responsibly, suggesting the government has no money to spend is simply untrue. Not only is the UK far from any limit to its borrowing, but responsible governments borrow to invest in their future prosperity.
This is about political choices and priorities. A successful economy strategy would be one which raises living standards and leaves a liveable planet for future generations.
This is what the Green Prosperity Plan was supposed to be about. Tying its success to the same political framing as the austerity which has caused so much harm over the last 14 years, rather than strongly making the case for why the government must borrow to invest, leaves the entire plan a hostage to fortune.
Having returned to working in think tanks after 15 years away, it is striking to see how little appetite our politicians have for bold ideas. It feels like we have a double-whammy of being trapped by an economic orthodoxy, coupled with a lack of political courage.
We know that another way is possible. When the Covid19 pandemic hit, the then Chancellor, Rishi Sunak, said he was throwing out the “rulebook” as he announced unprecedented levels of government intervention in the economy.
Now, faced with a civilisation-defining choice about how we manage the climate crisis, our political leaders have a choice between the incrementalism that got us into this mess or a step-change in the way we invest in a green transition. Public investment is key, and we need to adjust our fiscal rules accordingly to consider the impact of inaction or slow action. And the rewards of acting swiftly and decisively.
The truth is people write the rules of our economy. And we can rewrite them just as easily. We are told that money is scarce – but the world’s billionaires five richest men doubled their combined wealth in the last two years.
Politically, there is ample evidence that the public wants climate investment – especially when it will create jobs, save bills, and warm homes – and an ambitious industrial strategy. But we are done a disservice when we are offered two parties with similar economic policies in an election every five years.
My colleagues at NEF have been working tirelessly in recent years to make the case for why sensible investment green infrastructure projects must sit at the heart of government efforts and practical measures such as the Great Homes Upgrade to retrofit homes.
Contrary to what critics have said in recent months, the £28bn is not an arbitrary number. It is what the UK needs to lower emissions and create an economy that improves lives. Investing in things like renewables and home insulation creates more jobs, domestic supply chains, and growth than other investments.
The UK has already fallen behind other countries like the US and inaction now will prove far more costly further down the line. However, Labour has hamstrung itself by committing to misguided borrowing rules.
It is worrying how these choices get justified with the metaphors we use for the economy: as a choppy sea, a skittish animal, or a bucket of money. This government’s failed austerity project was justified by dishonestly comparing our government finances to a household budget. Perhaps our economy is more like a computer programme, constantly being revised and updated. Over the last 40 years, corporate elites have hacked the code and pushed for their interests, while most of the public have been locked out. But it does not have to be like this: we can reprogramme the economy to give everyone the good life we deserve.
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