Chancellor’s £7.3bn green gamble aims to boost UK economy

Rachel Reeves, the Chancellor, has unveiled a bold £7.3 billion investment plan to propel the UK to the forefront of green technology, committing to accelerating economic growth through high-risk, high-reward projects.

Reeves is determined to inject substantial funds into initiatives such as green steel, hydrogen production, and carbon capture and storage in the North Sea. These investments will focus on emerging technologies and early-stage projects, encouraging innovation and risk-taking.

A recently published report highlighted that many of these projects typically struggle to secure funding due to their unproven nature at commercial scale and the potential for cost overruns and construction delays.

Key initial targets include industrial decarbonisation, commercial green hydrogen production, and supporting new gigafactories. Investment decisions will be handled by the UK Infrastructure Bank, independent of direct ministerial control.

The newly established National Wealth Fund, central to Labour’s manifesto, seeks to leverage £3 of private investment for every £1 of taxpayer funding. This fund’s structure has been refined following recommendations from a report led by former Bank of England Governor Mark Carney and Barclays CEO CS Venkatakrishnan. The report advocates for the fund’s independence from government and its ability to attract private investment by assuming a larger share of financial risk. It also suggests competitive salaries to attract top-tier professionals.

Treasury sources indicate that the UK Infrastructure Bank will immediately begin identifying potential investment projects, with the £7.3 billion in funding becoming available following Labour’s first budget. A Treasury insider emphasised the government’s commitment to swift action, contrasting it with the delays of previous initiatives.

This strategic move is part of Labour’s broader plan to compete with the US, EU, and China, who are heavily investing in future technologies. However, the fund will avoid areas like solar panels and EV batteries, where China already has a stronghold.

Ed Miliband, Secretary for Energy Security and Net Zero, stated that this investment is integral to Labour’s mission to make Britain a leader in clean energy.

Despite the £7.3 billion public investment, the Climate Change Committee estimates that £50 billion annually is required for the UK to meet its climate targets from 2030-2050. Nonetheless, Reeves believes this funding will “turbo-charge” the UK Investment Bank’s efforts and attract immediate private sector investment.

Reeves highlighted the urgency of avoiding the delays seen in previous administrations, noting that substantial investments have been held back by bureaucratic hurdles. She expressed confidence that this initiative would restore investor confidence in the UK, distinguishing it from other countries.

In addition to this fund, the government will also launch GB Energy, an £8.7 billion public investment vehicle aimed at generating higher taxpayer returns through renewable electricity production. However, Reeves clarified that this is not a step towards state ownership of electricity generation.

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Chancellor’s £7.3bn green gamble aims to boost UK economy