Fact check: What will Labour's GB Energy actually do?

DOORSTEP ANSWER

Jobs for bankers, not engineers. At heart GBE is an investment bank that may, in time, leverage some useful green power projects, but the money involved is too little to be transformative and could well be wasted with Labour’s nuclear fixation.

LABOUR’S CLAIMS ABOUT GBE

AS a key take in its 2024 election manifesto, Labour proposes to set up a state-owned energy company called Great British Energy (GBE).

The company will “make Britain a clean energy superpower. It will “cut bills for good”. It will give the UK “energy independence from dictators like Putin”. Together with Labour’s other “green” investments it will help provide “650,000 new high-quality jobs, many in Scotland. And it will provide “warmer homes to slash fuel poverty”.

These are sweeping claims. Do they stand up?

WHAT IS GBE?

AFTER some initial confusion, Labour have clarified that GBE will not be an energy retail company, but it will jointly invest in power generation projects with the private sector and (presumably) retain some degree of ownership.

Formally, that allows Labour to declare that GBE is an energy company of sorts, but the primary activity of GBE as a company is to find investment partners. From that perspective it is mainly an investment bank.

WILL GBE GENERATE ITS OWN ELECTRICITY?

NO, it is primarily an investment vehicle “working alongside private partners” to “crowd in investment”.

The key phrase is “crowd in investment” from the private sector. In other words, GBE is a lever to subsidise marginal private projects.

HOW WILL GBE BE FINANCED?

LABOUR say it will “capitalise Great British Energy with an initial £8.3 billion in the first Parliament, investing in clean power in partnership with the private sector”.

The funding is slated to come from extending the levy on windfall profits of the big energy companies in the North Sea plus a reduction in some industry tax exemptions. But analysts have suggested this will decrease the cash available for investment in the private sector and so reduce production, cutting jobs in the sector by up to 100,000.

READ MORE: Net zero needs 'far larger' investment than Labour's GB Energy, expert warns

If so, that could reduce overall tax yield rather than raise extra. While the energy companies might be crying wolf, there is certainly a worry that Labour’s extra tax on the sector may simply divert cash from the private to the public purse.

WILL GBE HAVE ENOUGH FINANCE TO MATTER?

A RECENT study by NatWest suggests that the UK needs a further £900 billion in capital investment in green energy to achieve net zero by 2050, while the official Office for Budget Responsibility puts the figure at £1.4 trillion.

Current required green investment for the remainder of the decade (to reach 2030 emissions targets) is at least £15bn per annum.

Put alongside these projects (admittedly speculative) Labour’s proposed capitalisation of GBE amounts to only £1.6bn per annum over the lifetime of one parliament.

These numbers are small even if they are welcome. It should be remembered that Labour abandoned its earlier commitment for a £28bn green transition fund, on the grounds it was not affordable.

WHAT WILL GBE INVEST IN?

(Image: Newsquest)

ACCORDING to Labour, GBE “will make the UK a world leader in floating offshore wind, nuclear power, and hydrogen”.

The inclusion of nuclear power is significant. Labour have committed to a major expansion of nuclear energy, including in Scotland. But nuclear is mega expensive. The cost estimate for the Hinkley Point nuclear project have doubled from £18bn in 2015 to an astounding £46bn. This suggests that there is a danger GBE is suckled into underwriting private nuclear energy projects that have gone awry.

WILL YOUR ENERGY BILLS BE LOWER?

IT is not clear how GBE will actually lower energy bills. Theoretically, GBE could insist on lower consumer bills in return for investing in private sector projects.

However, presumably these projects have to make a competitive return otherwise the private investors won’t participate. So it is difficult to see how GBE could demand a lower sales price to the consumer.

Labour promise that GBE will invest in community projects. Labour’s policy document says GBE will partner with “local authorities and cooperatives to develop 8GWs small-scale and medium-scale community energy projects. Profits will flow directly back into local communities to cut bills, not to the shareholders of foreign companies”.

This is a worthy ambition but clearly it is both long-term and local in scale. There is no mechanism for a generalised reduction in consumer prices.

WILL GBE CREATE JOBS IN SCOTLAND?

THE Labour manifesto promises that “Scotland will be the powerhouse of our clean energy mission, with Great British Energy headquartered there”.

Labour also promises that “our Green Prosperity Plan will lead to more than 69,000 new jobs in Scotland”.

By comparison, the current Scottish offshore energy workforce is around 79,000 – though many of these workers are not Scottish.

So adding another 69,000 to the green workforce is a very bold claim, especially if it is to be delivered by 2030 in order to meet Labour’s new generating targets.

And those promised HQ jobs?

As a comparison, the state-owned Green Investment Bank (created in 2012 and privatised in 2015) had its formal HQ in Morrison Street in Edinburgh. But only 50 of the Green Bank’s 113 staff were actually based in the Scottish capital.

The important (and highly paid) financial dealmakers were all based in Millbank Tower in London.

It is difficult to see why matters would be any different with the very similar GBE.

WILL GBE HELP MEET EMISSIONS TARGETS?

ASSUMING a Labour General Election victory, and assuming the legislation to establish GBE is a first order of business, then allowing for staff to be hired, we might expect the company to be properly operational by 2026 at the earliest.

Given it then takes several years to negotiate the first investment projects and do due diligence, it is difficult to see GBE having any impact before 2028-29.

However laudable GBE is as a project, it will only operate as a mature player in the 2030s. Claims that it will have an impact on production, emissions and bills in this decade should be taken with a pinch of salt.

FACT CHECK RATING

Net zero.