Labour drops £28bn green pledge but commits £3.3bn to Local Power Plan

Domestic retrofit funding plans have been reduced but the party remains committed to creating ‘one million owners of local power’

After several weeks of uncertainty, Labour has ditched its plan to spend £28bn a year on green investment.

The U-turn follows a series of mixed messages from the party, with frontbenchers including shadow chancellor Rachel Reeves walking back on the commitment earlier this week while leader Keir Starmer indicated continued support.

But there was some positive news for the community energy sector, with Labour committing £3.3bn over the course of the parliament for its Local Power Plan, which would offer grants and loans to local authorities and communities to “create one million owners of local power”.

Labour remains committed to creating a publicly owned business, GB Energy, which would partner with energy firms, councils, and community co-ops to develop 8GW of clean power by the end of the decade.

This was welcomed by Joe Fortune, general secretary of Labour’s sister organisation, the Co-op Party, who tweeted: “The massive and rapid expansion of community owned energy production is something the Co-operative Party has campaigned hard for. Labour’s Local Power Plan will generate 1 million owners of energy and deliver 8GW of clean green community owned renewable energy.”

Pledges of £1.8bn for nine renewable-ready ports, £2bn on battery factories and £3bn on clean steel also remain in place, as does £500m a year in grants for companies creating green jobs, set to start in 2026.

But overall, it is reported that the policy change – which follows sustained attacks by the Conservative Party and concerns within Labour over the state of the economy and the rising cost of borrowing – will cut funding to under £15bn. Labour has restated its commitment to all-renewable electricity by 2030 but green campaigners, union leaders and the party’s left have expressed dismay.

Among areas affected by the change is the retrofitting industry, where there are a number of co-ops active. The plan to offer insulation grants to families will now only cover five million homes over five years, instead of 19 million homes over a decade, with a commitment of £13.2bn over five years – more than the current government’s commitment but less than Labour had planned.

As unofficial reports of the policy change emerged earlier this week, sector body Community Energy England, commenting on rumoured cuts to the home insulation plan, tweeted: “Don’t do it! Energy policy should start with ‘Insulation, Insultation, Insulation!’ ie reduce! It is an INVESTMENT with huge returns: permanent bill and carbon savings, well-being, health costs, econ regen, tax returns. All vote winners!”

And Jonathan Atkinson, business director at People Powered Retrofit, told Co-op News: “We’re disappointed to hear that the Labour Party are rowing back on commitments, in particular to those on retrofit and housing energy efficiency as reducing demand for energy from homes is key to reducing bills and meeting climate change targets.

“We hope that any future government can learn the lessons from countries like Ireland where coordinated, strategic support for energy efficiency is showing results. In particular we see a role for co-operatives in offering trusted, independent advice, supply chain development and training and innovative new services.”

Defending the change, Sir Keir told the BBC the change was a response to the UK’s economic situation, adding: “I can’t ignore the fact the Conservatives have done huge damage to the economy.”

Labour says the change is necessary if the party is to meet its spending rules which say debt has to be falling as a share of the size of the economy in five years.