Labour has accused the UK government of “complacency” over its muted response to Joe Biden’s attempt to turbo-charge the US economy with $369bn of green subsidies.
The US president’s landmark piece of legislation, known as the Inflation Reduction Act, has caused alarm among business leaders, with the CBI warning that the British economy was at risk in a global “subsidy arms race” for green growth as the EU prepares to respond.
Ed Miliband, shadow energy secretary, told the Financial Times: “The global race for the industries of the future has just been turbocharged by Biden. The EU has a response, China has been doing a lot of this for 15 years.
“Where is Britain? The runners are running around and Britain can’t tie its shoelaces, it’s crying foul saying ‘We don’t like the rules’.”
Miliband accused energy secretary Grant Shapps of being “deeply complacent” after he told a recent business event in east London that the UK was “10 years ahead” of the US on renewable energy and joked about British resilience to “Johnny come latelys”. Miliband said: “It’s not what British business is saying.”
Biden’s IRA, signed into law in August, has prompted fears in Europe of an exodus of green technology investments across the Atlantic.
Brussels, which will this week publish a net zero industry act as part of the EU’s response to the IRA, is considering loosening its state aid rules along with a subsidy regime.
Miliband said plans Labour drew up more than one year ago to borrow £28bn annually as part of a “green prosperity plan” to co-invest with the private sector in low-carbon energy projects could form the basis of Britain’s equivalent to Biden’s IRA.
The extra debt, amounting to £140bn over a five-year parliament, would not breach Labour’s fiscal rules because it would be for capital investment, he added.
Miliband said that by contrast the Conservative government, other than criticising Biden’s IRA as “protectionism”, had not done anything on the scale of the US intervention.
Ministers will later this month update their “net zero strategy” but the review was largely prompted by a judge’s ruling last summer that the previous version was unlawful.
Miliband rejected concerns that Britain could not compete in a subsidy race with the US, EU and China, pointing to the scale of the global opportunities in the drive to decarbonise.
He said: “I think that misunderstands a number of aspects of this debate. The International Energy Agency says we need $5tn of investment in green every year between 2030 and 2050 [from $2tn today], this is not a competition for a tiny pie, this is a competition for a huge pie.”
Miliband added: “The green transition is the economic opportunity of the 21st century, some countries are going to grasp it, and others are not.”
Labour, which has a 20 percentage point lead over the Conservatives in opinion polls, would set up a state-owned company called Great British Energy to co-invest in renewable and nuclear projects under its green deal.
Other Labour plans include a £6bn-a-year subsidy to insulate homes and £2bn towards building eight gigafactories to make batteries for electric cars.
“It’s necessary to de-risk green investment, if government is willing to be a co-investor it’s a signal that government believes in this,” said Miliband.
“It’s particularly important to be a co-investor for leading edge technologies like floating wind or hydrogen and so on which are more risky. And the government will get a return.”
The government said: “Far from being complacent we are maintaining our place as world leaders in investing in renewable technologies, increasing our energy security and independence and working towards net zero.”
Where climate change meets business, markets and politics. Explore the FT’s coverage here.
Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here