Labour’s Green Prosperity Plan – what’s changed?
How Labour’s net zero policy has changed and what it could mean for your business.
Key takeaways
- Headline ambition to annually invest £28bn in green industries replaced by costed commitment to spend around £24bn over the whole Parliament – a £4.75bn yearly average.
- Mission to achieve Clean Power by 2030 remains – total investments for a new National Wealth Fund remain, but investment for the Warm Homes Plan is scaled back.
- Details of revenue-raising windfall tax announced – Energy Profits Levy would rise from 65% to 78% and extend to the end of the Parliament.
Labour’s Green Prosperity Plan had been its flagship economic policy. First announced in 2021, the headline promise to invest £28bn a year in green industries had since been tempered to a commitment to spend subject to existing fiscal rules.
Labour’s decision to drop an annual spending ambition altogether is confirmation that lowering national debt as a share of GDP by the end of the Parliament is its primary economic policy ahead of the election.
The announcement comes on the day the party finalises its manifesto in the event of an early election.
Clean Power 2030
The Green Prosperity Plan’s core mission to deliver Clean Power by 2030 remains. Businesses long thought that ambitious – now scrutiny will intensify over whether the amount of private capital stimulated by the Plan’s commitments makes that mission achievable.
The Plan retains investments previously committed to over the next Parliament. This includes £7.3bn additional investment in a new National Wealth Fund with equity stakes in projects in return for funding, including:
- £2.5bn spent on UK steel sites within five years
- £1.8bn spent on renewable infrastructure around nine ports
- £1.5bn spent on EV and battery factories
- £1bn spent on industrial decarbonisation; and
- £0.5bn spent on green hydrogen production.
Up to £0.5bn per year remains available for businesses that develop renewable energy projects in coastal and industrial communities reliant on the energy sector. That would be delivered as a British Jobs Bonus through the Contracts for Difference process from 2026.
Newly announced, the Plan now commits £8.3bn initial capitalisation to Great British Energy over the first Parliament - £3.3 of which will be for communities and local authorities to build renewable projects; £5bn of which will be to catalyse private investment in nascent technologies like floating offshore wind and tidal, and to roll-out establish industries.
Warm Homes Plan
The Green Prosperity Plan also promised to improve domestic energy efficiency through its Warm Homes Plan. This has been the most significant scale-back of the policies previously costed.
Now 5 million homes below EPC rating C will be eligible for heat and green home upgrades by 2030 – just over a quarter of what was previously announced. In funding terms, Labour would continue existing home-upgrade schemes and invest an additional £6.6bn over 5 years. This compares to a previous commitment to £6bn each year by the end of the Parliament.
Labour is now aligned to the government’s target to upgrade all UK homes (around 16 million) below EPC rating C by 2035.
Windfall taxes
Alongside dropping its headline spending commitment, Labour costed the revenue it expects to raise from tax on oil and gas profits.
Newly announced, the Green Prosperity Plan would extend the Energy Profits Levy (EPL) to the end of the next Parliament and increase the rate to 78%. It would also reduce currently available investment allowances – the specific details of which are yet to be publicly confirmed.
The EPL is currently due to end on 31 March 2028, and is at a combined rate of 65%.
Labour forecasts that changing the EPL will generate £10.8bn over the next five years, compared to a total cost of the Green Prosperity Plan at £23.7bn over the same period.
What’s next?
The OBR’s analysis at the Spring Budget on 6 March will provide a clearer assessment of the next government’s fiscal inheritance – and how either party would likely implement their net zero agenda.
Green industries represent a significant growth opportunity for the UK. The CBI will therefore continue to show how the UK outsmarts global competitors offering attractive financial incentives by ensuring a predictable policy environment, overcoming skills and supply chain blockers, and accelerating planning consent and grid infrastructure.
Ambition remains important for both parties – and investors naturally respond to the size of investment. But how investment is targeted is now more important to ensure that it sufficiently stimulates the private capital needed to meet the UK’s climate targets.
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