Labour plans will boost investment but could squeeze money for new schools

Labour has committed to major green investment, but plans for spending on the rest of the public sector are less clear (Jordan Pettitt/PA)

Labour’s plans would bring above-average investment but could still mean a “squeeze” on budgets for repairing schools and hospitals, the Institute for Fiscal Studies (IFS) has said.

Against a background of concern about underinvestment in school buildings, the respected think tank suggested Labour’s proposals for a £28 billion “Green Prosperity Plan” would increase investment to 60% higher than the average for the last 45 years.

The plan involves making the UK a “clean energy superpower” by 2030, decarbonising the energy system, setting up a publicly-owned green power generator and investing in areas such as battery factories, clean steel and green hydrogen.

The IFS estimated this would mean, by the end of the next parliament, an extra £20 billion being spent per year on top of the £8 billion the Conservatives have already planned, increasing public sector investment to 2.6% of GDP compared to an average of 1.6% since the late 1970s.

Gwynt y Mor offshore wind farm — Labour has pledged more money for clean power regeneration, but the IFS said its impact would depend on how the billions were spent (Ben Birchall/PA)

But Ben Zaranko, senior research economist at the IFS, said the plan’s impact would depend on the money being well spent while the focus on green investments could mean a “real-terms squeeze” on spending in other parts of the public sector.

He said: “Current policy is for overall capital spending to be held more or less flat in cash terms after 2023–24.

“The additional investment promised by Labour is all earmarked for ‘green’ projects which support the UK’s transition to net zero. This implies that even under Labour, non-green investment would be frozen in cash terms.

“In other words, both parties’ plans imply a real-terms squeeze on other areas of public investment.”

He added: “It is clear that the specifics of things such as how Labour would redesign the Contracts for Difference scheme, or how its £2 billion Battery Power Fund would work, or how the new publicly owned energy company functions, will determine whether or not these are billions well spent.”

Raac schools closure — Remedial work being carried out at a school containing sub-standard reinforced autoclaved aerated concrete (Jacob King/PA)

Public sector investment has fallen since 2010 with significant cuts to Whitehall’s capital budgets in the decade up to 2020, which Labour is now blaming for the crumbling state of schools and other public buildings.

The Government’s current plans would see little increase in investment after next year, and Labour has so far not said it would change that but plans to lay out its full investment programme ahead of the next general election.

Jonathan Ashworth, who was made shadow paymaster general in Monday’s reshuffle, declined to say whether Labour would introduce a broader school rebuilding programme if it wins the next election when asked by Sky News on Tuesday.

A Labour spokesman said: “Labour’s plan to invest in Britain will boost growth, cut household bills and make working people in all parts of the country better off.”