Assessing Labour’s Plans for green growth

Thames and London City at spring
Aerial view on Thames and London city at Spring. Photo by sborisov on Adobe Stock.

With the UK’s General Election on the horizon, net zero is firmly on the ballot box. Recent weeks have seen the Labour Party flesh out their plans to deliver UK Green Growth – with the long-awaited Green Prosperity Plan released just days after Labour’s new Financial Services Strategy.

This blog sets out our assessment of these flagship documents, why Labour’s recognition of the vital importance of green investment for UK growth is welcome, and the steps Britain’s next Government must take to capture the net zero economic opportunity.  

The Green Prosperity Plan 

Labour’s Green Prosperity Plan (GPP) offers a stripped-back approach to delivering UK green growth, with proposed public investment reduced from the £28 billion per year previously pledged to around £15 billion a year. As the Conservatives are already investing about £10 billion a year, this means Labour will invest just under £5 billion a year more. This has particularly hit the homes agenda, with the commitment for upgrading homes worth up to £6 billion per year scaled back significantly. The headline commitments which remain are: 

  • Decarbonising the power system by 2030 
  • £8.3 billion for the publicly owned Great British Energy to invest in clean energy  
  • A (reduced) Warm Homes Plan to upgrade 5 million more homes by 2030, investing a further £6.6bn over the course of parliament. 
  • A National Wealth Fund capitalised to the tune of £7.3 billion to invest in industries such as electric vehicles, clean steel, ports, and hydrogen. 

The pledged £15 billion of funding per year goes some way to addressing the significant public investment gap Britain faces across its critical infrastructure and represents a 50% increase on the Conservative Government’s investment plans. However, this falls well short of the £30 billion per year of public investment called for by the National Infrastructure Commission to get the UK economy back on track. 

With the UK now in economic stagnation, the reversal of the UK’s economic fortunes is increasingly reliant on unlocking billions of private sector investment to drive the UK to net zero. The Grantham Institute has calculated the UK’s overall annual public and private investment need at 3% of GDP, or £77 billion. Turbocharging investment to such historic levels in the face of growing international competition represents a defining challenge for the next Government. Businesses and investors require total clarity of vision and direction, incentivising them to invest in the UK’s future, sustainable economy.  

In this context, the Green Prosperity Plan commitments must mesh into a wider plan for net zero growth across the economy – which leverages policy, regulatory and targeted investment support to give the private sector the confidence it needs to invest.  

Financing Growth – Labour’s Financial Services Strategy 

With that aim in mind, Labour has also set out its vision for the future of financial services, with sustainable finance listed as a key pillar of Labour’s proposals. Capturing green growth opportunities will undoubtedly be reliant on a world-leading regulatory framework for green finance. On this, there are welcome pledges to: 

  • Deliver a world-leading green finance regulatory framework, including commitments to set out a clear timeline for the much-delayed UK Green Taxonomy and for large private companies to be required to disclose 1.5-aligned transition plans 
  • Prioritise interoperability by adopting ISSB and engaging in key international fora like G7, G20International Platform on Sustainable Finance (IPSF) 
  • Financial Flow Tracking to ensure net zero policy is informed by data on investment flows. 

Clear, coherent and interoperable financial regulation is essential if the UK is to minimise regulatory burden and capture the UK’s net zero competitive advantage. These proposals can go some way to cementing the UK as a green standard setter internationally.  

Crucially, the paper also recognises the role of the financial sector in delivering warmer homes and energy independence. The upfront costs of home retrofits are a major barrier to action. It is therefore welcome to see a focus on financial solutions which can help make warmer homes affordable for all – including through green mortgages and zero per cent loans which spread the upfront cost of the retrofit and sit with the property, rather than the household.  

Is this sufficient? 

Taken together, the announcements in Labour’s Green Prosperity Plan and Financial Services Strategy make some progress towards delivering on Labour’s twin missions of becoming a clean energy superpower and becoming the fastest-growing G7 country. By providing investors and businesses with clarity that they will invest more in the net-zero transition and back crucial reforms of financial regulation, it is clear that building business confidence is a priority for the Labour Party.  

However, with persistent UK economic stagnation, increased international competition for green investment, and the UK off track to deliver on its legally binding climate commitments, we need to see more. If the Government is not prepared to raise green public investment further then they are going to have to pull out all the stops to put in place the regulation, policies and incentives to do the heavy lifting. 

Capturing the UK’s considerable green growth opportunities, which the CBI estimates at up to £57 billion per year by 2030, requires a clear strategy for mobilising private investment at the speed and scale required. Labour must therefore deliver a whole of economy ‘Net Zero Investment Plan’ (NZIP).   

With UK financial institutions representing  over £10 trillion AUM  united in their support for this proposal, there is clear market appetite. A Net Zero Investment Plan would utilise independent investment flow tracking to develop and update sectoral roadmaps. In turn, this would support the delivery of a UK transition plan by clarifying how investment, policy interventions, regulation and wider incentives will effectively crowd in private finance to deliver net zero. Crucially, this would ensure the public investment promised in the Green Prosperity Plan is effectively targeted and would enable smart course correction to ensure the UK remains on track.  

Labour has begun to offer much-needed detail to investors and industry on their plans for green growth. However, the UK faces a race against time to convince investors that it has a comprehensive long-term strategy for net zero and the growth that comes with it. Labour must now commit to developing an economy-wide Net Zero Investment Plan, to incentivise private investment and breathe new life into the UK’s flagging economy. Without it, Labour’s mission to make the UK a clean energy superpower will fail. 


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