The GK team is delighted to publish its report in our ‘What Would Labour Do?’ series on Energy. Our report covers key themes such as energy generation, domestic decarbonisation, green investment and the role of regulators.
The process for developing public policy can often feel invisible or “off the cuff”, but the debates are already underway on what a Labour Programme for Government might look like, through extensive policy forums, commissions, evidence gathering and more. It is often assumed that this is done at the last minute, but politicians need to be campaign- ready, particularly when the timing of a General Election is out of your control. The Labour Party is positioning itself as a credible government-in- waiting, recognising and valuing the role of business and keen to hear what support and changes might be required from government. Our advice – engage now, engage with positive solutions, thinking and evidence about how your sector may better operate. Offer what good looks like, and the implications of policies which sounds “good on paper” but has challenges in implementation.
Louise Allen, CEO
Wider Party Context
The chaos that ensued in the summer of 2022 following Boris Johnson’s departure, coupled with the financial market disaster post Liz Truss’ emergency budget, meant the public and the media were ready to listen to what the Labour Party had to offer. With the scene set for Labour’s conference, the Party chose the slogan “fairer, greener future.” This reflects the Party view that the transition to Net Zero will become the defining issue of the 21st century. The message to the electorate was clear: Labour will be the green choice, and will ensure that Britain is at the forefront of this economic transformation.
Underpinning the Party’s ambition was a pledge by the Shadow Chancellor Rachel Reeves to invest £28bn a year in green industries. The commitment was described as necessary to protect Britain from disaster. With the Party’s manifesto being formed, and the Party still enjoying a 15-20 point lead in the poll ahead of an expected General Election in the next 18 months, an internal debate on the Party’s commitment has emerged. On one side, Shadow Secretary of State for Climate Change and Net Zero, Ed Miliband, has argued that the Party must uphold its commitment, arguing a delay on climate action would increase costs. Rachel Reeves, on the other, has said she was concerned by the additional borrowing, having observed the impact of bond markets during Liz Truss’s short premiership. Reeves was able to win out, saying “economic stability must come first” and citing the damage on households from rising interest rates.
This episode is part of a bigger task facing Sir Keir Starmer’s leadership and the competing forces at play. In a bid to demonstrate that Labour is committed to the decarbonisation cause, the Party has pledged to end North Sea exploration. Speaking during a visit to Edinburgh, Keir said under a Labour government the Party would not issue new licences, but would instead focus on communities benefiting from clean power projects that would “cut bills, create jobs and provide energy security.” The move has been branded as naïve by the General Secretary of the GMB, Gary Smith, a key donor to the Party.
Like previous Labour leaders before him, Keir will have to navigate the demands of the trade union movement, socialist MPs in the Labour group, and campaign groups, whilst ensuring credibility with the electorate. This is no easy feat, and the decisions and trade-offs made will come to define his leadership. Energy is not just a rich policy environment; it currently stands at the heart of the challenges facing the Party.
Those with an interest in energy policy, must consider the politics at play. It is also the case, as we have seen with the backtracking over the £28bn a year green pledge, that policies are not set in stone and can be changed. Those organisations and individuals with a coherent perspective and an understanding of party dynamics can find themselves cutting through the noise.
Energy Generation
Against the backdrop of a continuing squeeze on global energy supplies, improving domestic energy supply whilst continuing the pursuit of net zero targets have become cornerstones of Labour policy. Somewhat controversially, although Labour has stated that oil and gas will have declining roles in the years to come, it has also confirmed that it will honour existing licenses for oil and gas exploration.
Labour’s approach reflects a growing confidence in this area, and the sense that there is an opportunity to steal a march on the Conservatives’ given their increasingly poor climate record. Central to Labour’s approach is the pledge to create a new public- owned energy generation company: Great British Energy (GBE), as part of its Green Prosperity Plan. The creation of GBE is a politically salient decision for three reasons:
Firstly, its creation helpfully delivers on a commitment of support for public ownership of energy, first made by Keir Starmer when campaigning for the Labour Party leadership. Perhaps more usefully for the Party’s election credentials, it also sidesteps the thorny ‘same old Labour’ criticisms regarding nationalisation of private companies as default party policy.
Secondly, the ceiling for GBE is high. Tied in with ongoing initiatives to decouple the prices of Britain’s wholesale energy market from the most expensive generator (gas), there is potential for a new energy generator focused solely on the development of renewable energy to make a tangible, positive impact on bills – and hopefully emissions - early on for a Labour administration.
Thirdly, although beginning from a standing start, the creation of GBE should also avoid saddling consumers with any additional costs - which tend to dull enthusiasm for climate policies – by utilising a new ‘national wealth fund’ that combines Government seed funding with investments from the private sector. This combination could enable Labour to quickly channel funding into renewables projects, whilst keeping a tight rein on spending.
Even despite a further entrenchment of the UK’s precarious economic footing, GBE will sit at the centre of Labour’s ambition to ‘Make Britain a clean energy superpower’, as presented in the 5 ‘missions’ made public by Sir Keir Starmer earlier this year. This indicates how central the creation of GBE is for Labour’s climate policymaking, and how the Party is banking on the new public generator to accelerate on to a 100% zero-carbon power system by 2030, delivering deep and long-term cuts to the price of energy for consumers. The reported design of GBE is shrewd. GBE will enjoy a mandate of improving energy resilience by allowing Labour to invest in domestic renewable energy capacity in partnership with the private sector, and will enable continuously increasing investment back into communities and energy systems to further catalyse the energy transition; using the generated profits to upgrade infrastructure nation-wide.
This appears to be a clear move from Labour to try and effectively control the net zero narrative, and demonstrate the pure economic benefits that can be enjoyed by leading on climate policy. Polling consistently suggests that the UK electorate overwhelmingly backs policies which support net zero emissions, but has also indicated – as Ipsos found in 2022 - that voters’ feelings are impacted when they consider the personal lifestyle and financial impacts of those policies on them. Labour seems to have grasped that it is vital to highlight how action on renewable energy generation can be translated into tangible, “more-money-in-your pocket” effects.
To complement GBE, Labour has also committed to other policies that will help deliver a decarbonised power sector. Perhaps the most significant of these initiatives are the proposed sweeping reforms to planning processes, which in their current format are used to block the construction and expansion of offshore and onshore windfarms. This move has long been called for after an effective ban was imposed by the Conservative Government. Lifting the ban will provide energy developers with greater confidence that the UK’s energy market has the stability and flexibility to invest in the infrastructure that is needed.