Sir Keir Starmer has signalled that he may not meet a flagship pledge to invest £28 billion a year in green projects within his first five years in Number 10, should Labour win power at the next general election.
The Labour leader said the plan to spend the vast sum of money on clean energy projects will only happen if economic growth is strong enough.
His remarks represent a fresh attempt to row back from the policy following Tory claims that he would have to raise taxes to afford it.
Sir Keir first unveiled the pledge in 2021, saying that he would borrow £28 billion a year from the moment he entered office to fund new green infrastructure. He then watered down the scheme in June, saying that figure would only be hit in the second half of his first term amid concerns about its affordability.
But during a major speech on the economy on Monday, he went even further, admitting that the target may not be reached at all. He told the Resolution Foundation think tank that the green investment pledge was “subject to our fiscal rules” on lowering the level of national debt.
“I am confident that if we turbocharge the growth that we need, we’ll be able to achieve the investment we need within the fiscal rules,” he added.
Asked whether that meant the £28 billion figure was only a target, he replied: “Those fiscal rules are the foundation upon which we build everything.”
He said his plan was to start off pumping money in at a lower level and “ramp up” to the higher amount if the economy grows enough to make it affordable.
Sir Keir made the remarks after Jeremy Hunt told the same event that Labour’s borrowing plans would require raising taxes on working families.
“It is economically illiterate to say you can meet a fiscal rule to get debt falling whilst at the same time increasing borrowing by £28 billion a year,” said the Chancellor. “The sums simply don’t add up. The result of that kind of borrowing splurge would be higher taxes, higher debt interest and lower growth.”
Sir Keir used his speech to toughen Labour’s rhetoric on financial prudence, insisting that he would not “turn on the spending taps” as prime minister.
He challenged the assertion that public spending was “the only lever that can ever be pulled” to stimulate growth and improve people’s lives. Labour would “certainly not” be “in the business of cutting” public sector funding, he said – but he also refused to say whether the state would grow on his watch.
His watering down of the green spending pledge and suggestions that he could match Tory budget constraints risks angering those on the Left of the Labour Party.
It comes after Left-wing MPs branded the Labour leader “Mandelsonian” for his comments heaping praise on Margaret Thatcher.
Senior figures on the Left suggested his kind words about the former prime minister may have something to do with Lord Mandelson, the Blairite ex-Cabinet minister who has been informally advising him.
‘We must invest in our country and its people’
After Monday’s speech, Jon Trickett, the Labour MP for Hemsworth, warned that cutting public spending “will lead to further national decline”. He said: “Instead, we must invest in our country and its people.”
Richard Burgon, a former shadow cabinet minister, said the answer was to “properly tax the corporations who’ve done so well out of this crisis”.
Sir Keir also used a question-and-answer session after his speech to insist that taking advantage of Brexit could help deliver stronger growth. He told the audience of economists and business leaders that it was “a mistake to think that the EU is a silver bullet” to Britain’s economic problems.
It came as a Whitehall think tank warned that Labour risks delays to its key policies because it has not opened talks on the possible transfer of power.
The Institute for Government said Sir Keir was “already running late” in starting discussions with civil servants on delivering his agenda for government.
Emma Norris, the deputy director of the institute, warned that the party had not gone “far enough for prioritising and planning the implementation of some of the big, meaty policies”.
The Telegraph understands that the Labour leader has not yet asked for talks to begin but that has alerted Downing Street that he will do so in January.