The shadow chancellor plans to follow Biden’s IRA model, establishing a £8bn national wealth fund
Shadow Chancellor Rachel Reeves is set to travel to Washington in May to meet senior Democrats. The purpose of the visit is to aid the Labour party in planning a public-private investment scheme that will follow the model of US President Joe Biden’s ambitious Inflation Reduction Act (IRA).
The scheme is predicted to focus on green industrial revival whilst stimulating the country’s most deprived regions. Establishing targets to create hundreds of thousands of jobs outside London and the south-east.
The proposed new national wealth fund will be endowed with an initial £8bn of funding from the state and then pull in from private investment.
International Landscape
This policy is in response to the growing international competition to attract green investment following the introduction of Biden’s IRA, signed into law in August last year.
The act is a £370bn package of protectionism, state aid, and subsidies designed to galvanize American business in the fight against climate change. Funded by subsidies through grants, loans and tax credits to public and private entities.
The policy has already been successful in drawing investment into Michigan, a rust belt state, where Ford has revealed plans to build a $3.5bn electric vehicle battery plant creating 2,500 jobs.
In response to this policy, the EU is also considering a Green Deal Industrial Plan with which it wants to grow clean energy production, revitalise manufacturing and support well-paid jobs.
UK Landscape
Whilst the US and EU accelerate investment into green projects the concern is that investment is being held back in the UK. The Shadow Chancellor has said that many UK companies are desperate to invest in offshore wind, tidal energy, green hydrogen, and carbon capture and storage. However, they fear that they would not get off the ground without government backing or a partnership model like the Infrastructure Investment and Jobs Act.
“The government said we were going to get electric vehicle production and batteries here, but we haven’t, and Jaguar Land Rover is on the verge of making a really big decision.”
Tata Motors, owner of Jaguar Land Rover, has reportedly asked the UK government for more than £500m in state subsidies to build a factory in Somerset, a move seen as crucial to the future of the entire British car industry.
Institute for Public Policy Research (IPPR)
According to the IPPR, a leading think tank, the UK is being left behind in the race to develop and deploy green technologies due to an unwillingness to invest in its industrial strategy.
In the seven months since the IRA was passed, clean energy companies in the US have announced over 100,000 new jobs across 31 states, compared with 11,500 new jobs in the UK over seven years.
Luke Murphy, associate director for the energy, climate, housing, and infrastructure team at IPPR, said: “While our international competitors are deploying public investment and using industrial strategy to take advantage of the opportunities of the net-zero economy, the UK Government appears to have its fingers in its ears.”
Institute of Directors (IoD)
The Institute for Directors recently called for a UK version of the Inflation Reduction Act to “incentivise much-needed green investment” and prevent the UK being left behind.
Dr Roger Barker, Director of Policy at the Institute of Directors has said “The Inflation Reduction Act in the US is a game changer which cannot be ignored by UK policy makers. It provides substantial incentives for companies to pursue green innovations and green technologies in the United States rather than in the United Kingdom. The EU is also raising the stakes through its ‘Green Deal Industrial Plan’ which, amongst other things, is proposing a significant relaxation of the EU’s state aid rules when it comes to investment in green technology.
Read more on Firstplanit
Check out our blog on how sustainable projects are boosting economic growth in the UK