The Labour party is planning to put the UK at the head of a worldwide green industrial revolution, with a massive US-style, public-private investment scheme targeted at the most deprived regions.
In an interview with the Observer, Rachel Reeves, the shadow chancellor, who will travel to Washington in May to meet senior Democrats, says a Labour government will follow the model of US president Joe Biden’s hugely ambitious regional recovery plan, using the climate crisis as the catalyst for economic revival.
She says Labour’s new national wealth fund, to be endowed with an initial £8bn of funding from the state but which it is hoped will then pull in private investment, will be given a specific remit to focus on green industrial revival in deprived areas with regional targets to create hundreds of thousands of jobs outside London and the south-east.
Ahead of the spring budget on Wednesday, in which the chancellor, Jeremy Hunt, will be under pressure to prevent an exodus of UK green industries to the US and the EU – both of which are preparing incentives to lure green firms from overseas – both Labour and the Tories are determined to ensure the UK will not be left behind.
Hunt is set to announce a £20bn investment in technology to reduce Britain’s carbon emissions in the budget, as well as plans to boost the nuclear sector with a competition to develop small modular nuclear reactors (SMRs).
Many UK companies, Reeves said, were desperate to invest in areas such as offshore wind, tidal energy, green hydrogen and carbon capture and storage, but feared that without government backing – on a partnership model like that pioneered by Biden in his Inflation Reduction Act – they “would not get off the ground”.
“The Tories are the last people in town believing that the ‘laissez faire’ approach of leaving it all to the market can work. Everyone else recognises that, in a world of such huge change and increased competition between nations for this investment, you have to have this partnership approach,” she said.
“All of this is up for grabs, no-one is doing a lot of this stuff at scale yet. We could be global leaders in some of this. There is a real urgency because growth is so low. This would be real levelling up, where the government has failed. We have got a serious plan and we just want a chance to get on and get started with it.”
Several key UK-based companies are now examining where best to operate. Jaguar Land Rover’s owner, Tata Motors, has reportedly asked the UK government for more than £500m in state subsidies to build a battery factory in Somerset, a move seen as crucial to the future of the entire British car industry.
Reeves said: “The government said we were going to get electric vehicle production and batteries here but we haven’t and Jaguar Land Rover (Britain’s biggest car maker) are on the verge of making a really big decision. It is crucial that batteries are produced by JLR in Britain or, as night follows day, more car production will move overseas.”
In January, the UK battery start-up Britishvolt collapsed into administration, with the majority of its 300 staff made redundant after talks about rescue bids failed. The company’s efforts to build a large facility near Blyth came unstuck as it struggled to find a cash injection to pursue the project. It has now been bought by an Australian company.
Labour has already committed to investing £28bn a year – or £224bn over its first eight years in government – on climate measures. Reeves says it will aim to create 450,000 new jobs over a decade from green industrial projects – in which the UK public will have a stake – including 50,000 in the north-west and Yorkshire, and 30,000 in the north-east, the East Midlands, the West Midlands and the east of England.
Reeves is planning to meet key architects of the Inflation Reduction Act (IRA) during her May visit and make a speech from there to “show the UK can deliver global leadership on climate change, on new industries and on the future of economic thinking”.
Biden’s IRA was signed into law in August last year and aims to spur investment in green technology by devoting billions of dollars in subsidies through grants, loans and tax credits to public and private entities. It has a strong focus on electric vehicles and the battery industry.
Since it was announced it has drawn investment into areas such as Michigan, a rust belt state, where Ford has revealed plans to build a $3.5bn electric vehicle battery plant that would create 2,500 jobs. The company explicitly referenced the Biden legislation as being a factor in its decision to locate there instead of Canada or Mexico.
The EU is expected to unveil more details this week of its net-zero industry act, which is also designed to lead to a big acceleration of green technology in EU member states, with recent changes to state aid rules also in the pipeline.
The Institute for Directors recently called for a UK version of the Inflation Reduction Act to “incentivise much-needed green investment” and prevent the UK being left behind.
Reeves said: “The exciting thing about some of the new industries of the future, whether it is floating offshore wind, or carbon capture and storage, or green hydrogen, is that they are going to create good jobs in places outside London and the south-east, in former industrial areas, in coastal communities. We are taking inspiration from president Biden and the US Treasury secretary Janet Yellen.”
