After months of prevarication, the Labour Party has made a dramatic reversal of its plans to decarbonise Britain’s economy. In 2021 the party announced that if it got into power, it would spend £28bn ($35bn; 1.2% of GDP) annually until 2030 to cut emissions and build up green industries; it subsequently adopted the more limited goal of getting to that level of spending after 2027.

On February 8th Sir Keir Starmer, the Labour leader, cut that figure to around £4.7bn per year, blaming the Conservative government for a weak economy, elevated borrowing costs and limited fiscal headroom. “We’ve got to adjust to the situation we find ourselves in,” said Sir Keir. “As circumstances change, you have to adjust your decisions.” The political calculation behind this decision is understandable; the policy that results remains a mess.

Start with the politics. Labour’s poll lead over the Tories is titanic—21 points, according to The Economist’s poll tracker. Yet the party’s reputation for economic management still remains an area of relative weakness: only 29% of voters say Labour would be better on the economy than the Tories compared with 28% who disagree, according to a poll by Ipsos in December.

The Conservative Party was intent on attacking the £28bn, which was an unfunded spending commitment. A political broadcast by Rishi Sunak, released on February 7th, warned that the policy would result in more borrowing or higher taxes. “Both of those things are going to cost you and your family,” he said, reviving a message that had proven potent in the Tories’ 2015 election campaign. Ditching the commitment means that the risk of Labour’s election campaign being torpedoed on grounds of fiscal irresponsibility has fallen. The change “should be enough to make Labour’s spending plans consistent with their promise to have debt on track to fall as a share of national income,” said Ben Zaranko of the Institute for Fiscal Studies, a think-tank.

But by closing down one avenue of attack, Labour has exposed two more. The first is that Sir Keir is an unprincipled flip-flopper. The U-turn has been excruciatingly slow in coming. When Rachel Reeves, the shadow chancellor, unveiled the £28bn number, the yield on ten-year British government bonds was about 1%. As yields rose, the policy was gradually hedged with so many caveats that it became a zombie, privately declared dead by some party figures but officially still in force (and described as “desperately needed” by Sir Keir as recently as February 6th). This dithering reinforces a growing critique of Sir Keir: that his deliberative, consultative approach to decision-making is simply too slow for modern government.

The second avenue of attack is that Labour does not have a vision for government. Junking the policy was met with despair by many in Labour’s ranks who want faster action on climate change and question whether the decision leaves much of an agenda at all. It makes the party more vulnerable to poaching from its left flank, particularly by the Green Party and the Scottish National Party.

As for the policy, the end of the £28bn-a-year target is not something to mourn. The pledge was retrospectively cast as a response to the American government’s Inflation Reduction Act, a vast package of green-energy tax breaks, and similar responses in Europe. Yet Labour never properly acknowledged the challenge that Britain faces, as a mid-sized economy with weak public finances, in rivalling America in luring investment.

Its size may also have been beyond what was needed. The Climate Change Committee (CCC), which advises the government on the climate transition, estimates that reaching net zero requires total public and private investment in green projects to increase from around £10bn per year in 2020 to about £50bn per year by the end of this decade, and to stay at that level until 2050. But only £9bn-£12bn of that amount (in 2020 prices) would need to be public money, significantly less than Labour’s original scheme.

The heft of the programme skewed Labour’s plans. Out of a possible £224bn of spending envisaged under the original scheme, only £68bn had actually been earmarked for projects. But the commitment had the effect of crowding out other spending. The party has announced almost no new additional capital expenditure elsewhere. Members of the shadow cabinet hoped they could recast things like repairs to ageing schools as decarbonisation measures in order to qualify for green funds.

If ditching the £28bn number makes sense, however, today’s announcement still raises difficult questions for Labour. The party says that it will go ahead with plans to create a state-owned energy company and to insulate homes, albeit at a reduced pace, and that its goal of decarbonising Britain’s electricity supply by 2030, with private investment doing the heavy lifting, remains intact. That ambition already seems deeply improbable given delays to the Hinkley Point C nuclear-power station; and spending less than the CCC recommends each year would make it harder to reach longer-term goals.

The curtailed programme also does nothing to resolve the fundamental tension in Labour’s climate policy: whether its “Green Prosperity Plan” is primarily about greening the economy or making it more prosperous. The party still promises a “national wealth fund”, with £7.3bn in capitalisation to invest in schemes such as hydrogen manufacturing and ports, as well as a “British jobs bonus” that would offer up to £500m a year in capital grants to firms that set up in poor regions. Ed Miliband, the shadow environment secretary, often complains that although Britain has rapidly expanded offshore wind generation, many of the turbines are operated by foreign state-owned firms such as Denmark’s Ørsted.

Yet money spent to subsidise the manufacturing of wind turbines and the like in Britain over cheaper foreign imports raises the cost of net zero overall. And that is money which cannot be spent on more efficient drivers of the transition, such as consumer subsidies to encourage people to buy electric cars and heat pumps. Sir Keir’s climate U-turn has been a long time in coming but a bigger rethink is still needed. ■