British wages are expected to remain below their 2008 level until 2028 in real terms, and the cost of living crisis is raging on. The UK is one of the most gas-dependent economies in Europe, while gas prices are still more than double their historic average. Addressing these problems requires more public investment to upgrade our energy system, accelerate the switch to renewables and help make homes and industry more efficient. This would help to create new jobs and make Britain less vulnerable to the whims of global energy markets, and until recently, both Labour and the Conservatives recognised that more government spending was necessary. But while Labour has cautiously restated its commitment to achieving climate targets, the Conservatives have reversed course, while attacking the opposition for its spending pledges.
We urgently need a more enlightened debate on this issue. The chancellor, Jeremy Hunt, has repeatedly argued that more investment will contribute to higher inflation and force the Bank of England to raise interest rates. Tory MPs have cited dubious unpublished studies in support of these arguments. At the same time, we hardly ever hear about the benefits that public investment could deliver. In 2022, the government froze public investment in cash terms, meaning it will fall to 1.8% of GDP in five years’ time. This is below pre-pandemic levels, which many economists already regarded as too low. Though Labour has promised to spend £28bn a year on green projects by the second half of the next parliament – subject to its fiscal rules – even this would still fall well below the average in other advanced economies.
