I don’t doubt that he wants to commit to be the £28b figure he originally promised but he must have looked at some polling or numbers and decided that this is some electoral calculus he needs to consider. Otherwise why is this even a story? He must know that he doesn’t have enough support (or as much support as he wants) to fully commit to this in the Labour but Brexit voters cohort which align strongly with reducing green measures. I think that’s why he’s testing the waters by putting the feelers out suggesting that he’ll drip the promise and see how that polls before officially doing it.
I would be really disappointed if the cost of this election turned out to be £28b in investment for our future.
The hesitation is due to Truss fucking the bond market, and thus interest rates.
We currently have interest rates significantly higher than economic growth, and as such we can’t basically borrow money for free. Which is doubly infuriating because since 2010 we could have.
As such, the attack line of 28bn in potentially unfunded spend is a bad one as its the same attack the Tories have been throwing at Labour since 2008, that they fucked the economy (which is false).
So what Starmer is saying is the spend will only happen if it can be funded.
The problem is that he genuinely cannot know what will and won’t be fundable until we know the state of the economy once the election happens. If the bond market continues its recovery, then borrowing will be cheaper, and the ROI of growth vs interest is wider. An election in May would actually hurt Labour more, because there is less recovery time, and so higher borrowing costs.
Well yeah that’s the official line from Labour, for sure. We are hedging our goals for government dependent on the state of the economy. Sounds like a reasonable thing to do.
Except this isn’t borrowing to bung money to your already rich mates ala Trussonomics. This was billed (and what got people excited in the first place) as borrowing for long term environmental policies to accelerate our path to a greener future. Why drop this particular pledge and not others?
It’s interesting that Labour hasn’t gone with: Despite the mess 14 years of Tory government has left us in the right thing to do is to invest in our future for the long term and seen how that polls. It’s simultaneously attacking the Tories and committing to green funding. Starmer’s team could have easily said this and still left room enough to pivot but he’s clearly seen some polling that suggests even this is too much for Labour Brexitiers that want nothing better than to dilute green policies.
This is all conjecture of course, but all I’m saying is that he could have kept life in this pledge rather than dropping it like a sack of shit the first chance he got. The only thing that makes sense is that he knows that anti green policies goes down well in a large subsection of potential Labour voters and right now he wants their votes more than he wants green policies.
It’s interesting that Labour hasn’t gone with: Despite the mess 14 years of Tory government has left us in the right thing to do is to invest in our future for the long term and seen how that polls.
So let’s think this though. It is a good attack line, and as we saw with Johnson and Truss the electorate are not opposed to spending, especially when it’s investment. So the problem isn’t polling.
The problem is how the bond market will respond.
Labour’s response to the bond market (almost) shitting itself to death due to Truss’ completely unfunded spend commitments (ie tax cuts) cannot be to make further unfunded commitments, especially on this scale.
If they did, with the polling lead they have an being odds on favourite to win the election, the market implodes, pensions are turbo fucked, interest rates grow even higher, and the Tories end up winning.
I don’t like this, I don’t want this to be the reality, but when reality is that Labour needs to borrow to make this investment, they are at the behest of the lenders, aka the bond market.
I hear the point about the bond market, but is there not a difference when Truss borrowed not to invest but to cut taxes for rich people Vs the idea of borrowing to invest? Surely governments borrow for the purposes of capital investment all the time?
Yeah, there is a difference, but that doesn’t mean it’s a binary.
The core issue with Truss was borrowing without a return. She would have been borrowing for operational expenses, which don’t generally speaking lead to higher growth.
Borrowing for capital expenditure / invest should lead to growth, but that’s why I said in my first comment about growth vs interest paid.
Strictly speaking I’m talking about both gilts and bonds, but for these purposes the issues are pretty much the same.
The cost of borrowing - ie the interest rate paid by government - goes up based on the Bank of England base rate, and/or inflation, depending on the loan. Some are inflation linked, some are base rate tracking, some are fixed rate, etc.
So for a simple example, if you are borrowing money at 5% interest (per year) and you’re investing it in to capital projects which grow the economy by 1% (per year), you are actually losing 4% per year, and need to find a way to cover that expenditure. You really don’t want to borrow more money for that, because it makes things worse, so you either need to raise taxes or cut expenditure elsewhere.
This is the real damage both Truss/Kwateng, but also Cameron/Osborne caused. Under Cameron, the UK’s rating was downgraded from AAA to AA and has never recovered. This also causes an increase in borrowing costs as private finance point to it as a reason of supposed risk, even though we’ve never failed to pay back our loans. These things combined had lead us to where we are.
Since about 2010, growth of the UK economy has been around 1 percent. But until Truss, the base rate was practically 0 percent, and inflation was under 2%, so we could have borrowed a lot to fund a lot of capital investment, if only the party in government wasn’t ideologically obsessed with actively damaging the economy through austerity.
But now, with both inflation and the base rate at levels not seen in decades, but growth still around 1 percent at best, and potentially turning negative, getting people (ie bond and gilt buyers) who at their core believe only in monetary policy to consider Keysian approaches to economic recovery, and to fund them, is a difficult thing, and they are easily spooked.
I want this money to be spent, it’s genuinely one of the only things I’m enthusiastic about with their policy platform, but honestlty, I think Starmer/Reeves are taking the boring and sensible approach here. They’ve said how much they want to spend, and have been straight forward in saying that they will need to borrow to fund it. It is reasonable to admit that the amount which can be borrowed depends on factors out of their current control (as opposition), and they will scale down if they are required to do so.
But that doesn’t stop me feeling like it’s a bit of a bait and switch.
Maybe he thinks current labour are just Tory lite and is expecting them to drop it to please their oil baron bosses.
This is the best summary I could come up with:
Keir Starmer has been urged not to backtrack on his plans to spend £28bn on green projects by Labour’s Greater Manchester mayor, Andy Burnham.
He told the Labour leader to “stick to your guns” after Starmer said he may scale down the investment given the financial picture he would inherit if he became prime minister.
The Conservatives have been increasing their attacks on Labour over the proposal after the UK entered the election year, but supporters have been concerned about watering down the pledge.
The mayor said the investment could reindustrialise the north and make the nation a “clean energy superpower”, adding: “That is about building future prosperity.
Burnham said the investment could be raised incrementally rather than spent upfront but warned that “the more we delay” the more other governments will win the green race.
He said that ensuring Labour sticks to its “fiscal rules”, which include making sure debt is falling, was more important than hitting the green spending target.
The original article contains 359 words, the summary contains 162 words. Saved 55%. I’m a bot and I’m open source!
