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The UK Treasury is drawing up plans to cut the funding for GB Energy in June’s spending review in a fresh blow to energy secretary Ed Miliband.
The Labour government set up GB Energy as a publicly owned company with a mission to invest in the generation and supply of clean energy to accelerate the decarbonisation of the electricity grid.
The company had been promised £8.3bn in taxpayer money over the five-year parliament, but was only given an initial £100mn in October’s Budget to cover the first two years.
Ahead of the spending review, ministers are now running the slide rule over whether they can afford to give GB Energy the full £8.3bn, according to people familiar with the discussions, amid mounting pressure on the government finances and a pivot towards greater defence spending.
One option under consideration by the Treasury is cutting the £3.3bn previously earmarked for GB Energy to fund low-interest loans via local authorities for projects such as solar panels on roofs and shared-ownership wind projects.
Neither the Treasury nor the Department for Energy Security and Net Zero said that GB Energy was still guaranteed the £8.3bn, which was a pledge in last year’s general election manifesto.
Ministers are carrying out a “zero-based review” of all government spending and whether it is still a priority. One government official said the stock response “‘HMT refuses to confirm X” could now be “applied to every single spending commitment” because of the ongoing spending review.
The uncertainty over funding comes as many in industry remain unclear about exactly what role GB Energy will play in the rollout of low-carbon electricity schemes in the UK. Offshore wind, for example, already attracts significant private sector investment.
There are also questions over whether chancellor Rachel Reeves will fulfil a previous pledge to provide £13.2bn for energy efficiency schemes over this parliament — a doubling of the sums the last Conservative government had promised to spend over the same period.
Some campaigners fear that the so-called Warm Homes programme, which funds insulation and other household energy efficiency improvements, could also be vulnerable to cuts in the spending review. “There is a really strong concern among relevant stakeholders that it will be significantly cut,” said one campaigner.
Meanwhile, another of the Labour government’s flagship green initiatives, the National Wealth Fund, has been abruptly reprioritised. Reeves announced on Sunday that the remit of the NWF would be changed so that it could invest in the defence industry as well as its original goal of decarbonising Britain’s heavy industry.
Some Labour MPs have supported Prime Minister Sir Keir Starmer’s newfound emphasis on defence spending. “We have to be able to reconfigure how we do things when we’re talking about a rearmament moment. It’s like the 1930s, even those of us who see climate change as a very serious threat . . . want Europe to arm, baby arm,” said one backbencher.
Miliband has already been over-ruled on the government’s backing for the expansion of Heathrow airport’s third runway, which was announced by Reeves as part of a major push for economic growth in January.
The energy secretary, who threatened to resign from the same post in 2009 over Heathrow’s planned expansion, was told about the plan before Christmas and was “furious”, according to people familiar with the situation.
Miliband’s allies said that this time around he would not resign over Heathrow, not least given the project might not even get planning permission before the next general election, expected in 2029.
However, there are concerns inside Downing Street and the Treasury about the cost of the broader “Net Zero 2050” agenda and whether some policies will prove to be too expensive for consumers and industry.
There have been particular jitters about the impact of the “ZEV Mandate”, which is forcing carmakers to produce a certain proportion of electric cars or face fines — a target that increases every year.
The changes to the NWF’s remit and the expected cuts to GB Energy’s budget are not the first retreat by Labour from its lofty green plans.
The NWF was already a far less ambitious entity than the new fund that Labour had promised in opposition. After the election, ministers simply rebranded the existing UK Infrastructure Bank as the NWF and quietly cut the extra funding they had promised from £7.3bn to £5.8bn.
And just over a year ago Starmer and Reeves slashed a broader “Green Prosperity Plan”, which included the NWF and GB Energy. They cut the overarching plan from £140bn over five years to just £24bn over the same period.
“You could imagine a situation in a few years time where [Starmer’s chief of staff] Morgan McSweeney pivots away from green policies because he’s worried about the rise of Reform and their anti-green message,” said one official. “At that point you’d have to wonder if Ed would survive.”
The Government said: “We are fully committed to GB Energy, which is at the heart of our mission to make Britain a clean energy superpower and to ensure homes are cheaper and cleaner to run.”
