Labour’s eco-aristocracy

Ed Miliband’s green policies would amount to a massive bung to the wealthy

Labour’s shadow Net Zero secretary, Ed Miliband, has unveiled his party’s latest plans for ‘green growth’.

Speaking last week at an event organised by the Green Alliance, Miliband said that in order to keep up in ‘the global race for green jobs’ a Labour government would implement its own version of US president Joe Biden’s much-heralded climate bill – otherwise known as the Inflation Reduction Act (IRA).

The IRA is a significant piece of legislation. Approved by US lawmakers last August, it includes a record $369 billion in spending on climate and energy policies. Many among our political and media elites on both sides of the Atlantic have hailed the IRA as a victory in the struggle against climate change. But there has been criticism, too – especially from the EU and the UK, where energy secretary Kemi Badenoch, among others, has labelled the IRA ‘protectionist’.

As well she might. Take the Clean Vehicle Credit (CVC) provision, a key element of the IRA. This will mean that American motorists will receive $7,500 toward each new battery-powered or plug-in electric vehicle, and $4,000 for each old one. But to qualify for these state credits, electric cars must have had their final assembly done in North America. And they must not contain battery parts or ‘critical minerals’ sourced from China. Moreover, there is nothing in the IRA that stops the restrictions on imports from China from also applying to automotive industry leaders like Japan and the EU. Unsurprisingly, this has sparked outrage among the US’s allies.

The protectionism doesn’t stop there. Under the IRA, the US government is also offering to subsidise US-based manufacturers with handouts of up to $10 billion per electric-car factory. As a result, Germany’s Volkswagen and Norway’s Freyr Battery have already postponed the construction of plants in Europe and have accelerated plans to build assembly facilities in North America instead.

This, then, is what Miliband wants Britain to emulate – an enormous state subsidy for domestic industries (especially electric cars), alongside a Trumpish, America-first posture that will pit Britain into conflict with other developed economies. ‘Joe Biden wants the future Made in America, we want the future Made in Britain’, said Miliband.

These are grand, aggressively protectionist words from Miliband. But mirroring the IRA in Britain hardly looks feasible. For example, to compete with America’s bung to its electric-car consumers, Britain would have to spend roughly $40 to $50 billion. Furthermore, the idea that Britain could make such subsidies conditional on electric cars featuring all-British batteries and general components is simply implausible. The UK’s attempt to make its own batteries, through the 2019-founded start-up Britishvolt, collapsed in January. And although Britishvolt has since been bought by an Australian firm, it still faces an uncertain future.

Miliband has accused critics of his plan of ‘defeatism’. But it’s not defeatism to draw attention to Labour’s shallowness. By drawing so much from the ‘green growth’ policy of the Biden administration, Labour is avoiding having to come up with an actual growth plan tailored to the UK’s economic needs.

What’s more, in his quest for headlines, Miliband seems all too willing to ignore the huge problems with the IRA. First, as stated above, it is dangerously protectionist. Second, the scale of the state largesse and public borrowing it involves is much more likely to cause inflation than to reduce it. And thirdly, subsidising purchases of electric cars will only really help the better-off. The vast majority of ordinary Americans will simply not enjoy the supposed benefits of the IRA.

Yet Labour does not seem to care about any of this. It’s as if Miliband really does believe the green hype that has surrounded the IRA in the US, with Biden hailed for assuming the lead in the battle against climate change. Perhaps Miliband and Co think some of that hype will rub off on them. But no amount of reflected glory can hide what Labour is doing here. It is promoting belligerent protectionism, while indulging in the fantasy economics of ‘green growth’. None of this is in the interests of ordinary voters.

Photo: File ID 19367918 | © Gunter Hofer | Dreamstime.com