Prime Minister Keir Starmer has reiterated the importance of green investment and planning reforms to Labour’s growth plans as he delivered a grim assessment of the economic legacy the new government will leave behind this morning.
Speaking in the garden of Downing Street ahead of the return of Parliament next week, Starmer was critical of the previous Conservative government’s economic record and public service mismanagement, pointing to the “£22 billion black hole” in public finances and saying that the recent unrest had forced the government to “review the exact number of prison places we have”.
Starmer warned that the scale of the “black hole” – a gap in finances that he said the Office for Budget Responsibility was unaware of before the election – meant this autumn’s budget would require “tough choices”.
“There’s a budget coming in October and it’s going to be painful,” Starmer said. “Given the situation we’re in, we have no choice. That’s why those with the broadest shoulders should bear the greater burden.”
The Prime Minister has so far indicated more clearly that tax rises are likely to play a major role in the upcoming budget and defended the recent decision to means test the Winter Fuel Allowance for pensioners, but hinted that additional support could be introduced for some households.
“I did not want to make the Winter Fuel Payment means tested,” he said. “But it was a decision we had to make. A decision to protect the most vulnerable pensioners while doing what is necessary to repair the public finances.”
Starmer positioned the budget as part of a broader effort to repair an economy that has endured a “decade of decline”.
“We have made the difficult decision to put the public finances in order for the long term,” he said. “It is a difficult compromise and there will be more to come. I will not shy away from making unpopular decisions now if they are the right ones for the long term. That is what a government of service is all about.”
The Prime Minister stressed that the budget will be accompanied by a programme of reforms designed to boost growth across the economy, including measures to increase domestic clean energy capacity and reform of planning rules to accelerate the development of green infrastructure and housing.
He also reiterated that when Parliament resumes next week, the Government will move quickly forward with a wide range of plans to boost investment and growth, such as the launch of a new government energy investment vehicle. “Great British Energy will be owned by the taxpayer and will make money for the taxpayer,” he said. “It will produce clean energy and create good jobs.”
He also highlighted plans to remove planning barriers, introduce tougher penalties for companies that cause water pollution, transfer the railways into public ownership and harness the potential of artificial intelligence (AI).
“Parliament returns next week and politics will resume,” Starmer said. “But it will not be business as usual, because we cannot continue like this… from now until Christmas we will continue as we began: actions, not words.”
The speech came as Financial Times reported that the government has begun recruiting staff to set up GB Energy, ahead of announcing where the new company will be headquartered early next month.
The government has announced that the state-owned company will be based in Scotland, although the exact location of the project has yet to be confirmed; Aberdeen, Edinburgh and Glasgow are likely in the running.
Starmer’s speech also came after it emerged that Energy Minister Miatta Fahnbulleh had written to energy suppliers inviting them to take part in a roundtable discussion later this week on measures to support vulnerable and low-income households ahead of winter.
The intervention comes after Ofgem confirmed last week that the cap on energy prices for households will rise again this autumn, by around 10 percent to £1,717 a year for an average energy bill for both fuels.
Fahnbulleh said she wanted to discuss with energy suppliers “an ambitious package of commitments for the coming winter.” “I hope we can work together to protect vulnerable consumers in the short term, while accelerating our transition away from fossil fuels and towards energy independence, which will permanently reduce energy bills,” she said.
In related news, analyst firm Cornwall Insight today released a new forecast of energy costs for businesses, showing that a typical small business such as a pub, restaurant or independent retailer is paying over £5,000 more a year on energy bills than before the energy crisis, with bills expected to rise even further from early next year.
The small business index included in the forecast assumes that annual electricity bills will average £13,264 by April 2025 – 70 percent more than in 2020 and 2021.
“Our forecast of business energy costs shows that businesses are not faring any better than households. Their bills are still well above historical averages,” said Dr Craig Lowrey, senior consultant at Cornwall Insight. “Although prices have stabilised from their crisis levels, they are far from sustainable for the many smaller businesses already struggling in this economic climate.”
“Despite all the criticism of the energy price cap for households, it offers protection that businesses simply do not have. Given the impact of the cost of living crisis on consumer spending and retail, the Government needs to think seriously about how to support businesses with their high energy bills if it wants to prevent further business closures.”
Juliet Phillips, head of the UK energy programme at the think tank E3G, called on the Labour government to make green investment “a central pillar of any credible plan to address the causes of Britain’s economic decline”.
“This will be vital to securing the UK’s future economic competitiveness, reducing energy bills and increasing energy security,” she said. “The Chancellor of the Exchequer should use the Autumn Budget to invest in the clean industries of the future, create jobs and promote a just transition for carbon-intensive industries. The introduction of the Clean Power Mission and the Warm Homes Plan can help to permanently reduce the cost of living and support economic stability. As we head into another winter of high energy bills, the Chancellor of the Exchequer must introduce additional targeted energy cost support for households in need.”
You can now register to attend the fifth annual Net Zero Festival, hosted by BusinessGreen at the Business Design Centre in London on 22 and 23 October.
