Rishi Sunak’s failure to spot the growth potential from greening the economy means Britain risks losing out in the global race to exploit the opportunities from tackling the climate crisis, the shadow chancellor, Rachel Reeves, has said.
Interviewed ahead of Wednesday’s budget, Reeves said it was clear the chancellor was “quite a sceptic” both about the climate threat and the ability of government to do anything to meet the challenges ahead.
“When Sunak talks about climate it is always about the costs and not the opportunities,” Reeves said. “That is quite different from my approach. The only way to be a responsible chancellor in today’s world is to be a green chancellor.”
The Treasury said the budget would include funding of £26bn to meet the UK’s 2050 net zero pledge, of which £14bn was new money. This will include £4bn for retrofitting public and private buildings, £2.6bn on flood defences and £1.5bn on research and development.
Reeves said there was a “massive gap” between the government’s rhetoric and its actions, citing as an example the offer of a £5,000 grant to install heat pumps. “That sounds great until you learn how much they cost and until you learn that they are not going to work unless you’ve got a properly insulated home.”
The shadow chancellor, who announced plans at last month’s Labour’s conference to invest £280bn over the next decade to hasten the net zero transition, said that while there was a moral imperative to pass on an “inhabitable planet to our children” there was also an economic case for stronger action.
She said the government’s own financial watchdog – the Office for Budget Responsibility – had made clear the costs of inaction on the climate crisis were higher than those of action, adding that there were “huge opportunities here for us a country”.
Noting that the German government had invested £9bn in developing hydrogen as an energy source against the £250m allocated by the UK, Reeves said: “There is a global race to see which countries will get those jobs and investment in the future.
“Look at wind turbines. We are doing a fantastic job in producing energy from wind but we are shipping the turbines in from Indonesia. That’s absolutely insane.
“If we dither and delay in all the other areas we know are going to be the sources of future growth we will be importing everything else – from steel to hydrogen, heat pumps and electric vehicles.”
Reeves said Britain had the industries and the skills to take advantage of the opportunities afforded by the net zero transition but the challenges were not going to be met unless business and government worked together.
Sunak will highlight the economy’s rapid bounceback from its winter lockdown and the much-better-than-expected unemployment figures in his speech, but Reeves said there was “a lot of complacency about the recovery”. Retail sales have fallen for five successive months while the recent monthly growth figures have been weak.
There were, she said, three priorities for the chancellor: helping individuals through a winter cost of living “crisis”, supporting business after a “torrid” 18 months, and getting to grips with the long-term economic challenges.
Labour would support the government if, as expected, Sunak responds to motoring fuel prices reaching record highs this week by again freezing duties on petrol and diesel. Given that many poorer people have no option other than to drive to work, it would be “irresponsible” to further increase the cost of driving, Reeves said.
She also said Labour was opposed to the 1.5% increase in national insurance contributions to fund health and social care spending, and was looking at alternative ways of raising the money.
“We have been very clear that we would ask those with the broadest shoulders to pay more of the burden,” Reeves said.
“At the moment if you get your income through stocks, shares, dividends, buy-to-let properties, you are not paying a penny extra to pay for the increase in spending in our heath and social care system. That’s just not right.
“You could have a landlord who rents out his property to a young nurse; she’s paying more in national insurance and he’s not paying anything more in tax.”
Reeves said at present the government was only interested in taxing people who got their income from doing a “hard day’s work” while Labour was looking at other forms of income.
“I want to encourage entrepreneurs to invest in this country and create wealth, and so we want to make sure the system is doing that,” she said. “But I think it is clear the direction of travel that we want to go in.”