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Sir Keir Starmer has slashed Labour’s flagship green spending plan from £28bn annually to just £4.7bn a year as he sought to close down a political dispute about how much his party would borrow if in power.

As Starmer dismantled his party’s signature policy pledge, the Labour leader sought to pin the blame for his U-turn on constrained public finances resulting from Liz Truss’s disastrous premiership in 2022.

“As conditions change, you adjust your position,” he said on Thursday.

Starmer said half of the vastly reduced annual spending pledge would be funded from Labour’s previously promised windfall levy on North Sea oil and gas, with the other half from additional government borrowing.

The shift, just days after Starmer insisted he was committed to the £28bn figure, is intended to leave Labour less vulnerable to Conservative attacks about borrowing when the public finances are tight.

But the U-turn will open up Starmer to fresh accusations that he is prone to “flip-flops”, having changed his positions on numerous policies since he became leader of the opposition four years ago.

Conservative Prime Minister Rishi Sunak on Thursday said the move showed the Labour leader lacked a consistent plan.

Sunak said Starmer had a “proven track record of U-turns on major policies”, which had been demonstrated again by Labour abandoning its £28bn-a-year green spending pledge.

Labour will retain two elements of the original green plan, a state-owned energy company called GB Energy, costing a one-off £8.3bn, and a £7.3bn “national wealth fund” to invest in the decarbonisation of heavy industry.

A third part of the plan, a national insulation scheme called the “Warm Homes Plan”, will be slashed from £6bn a year to just over £1.3bn a year.

A further £1.5bn over three years is still pledged for renewable energy companies hiring workers in Britain’s industrial heartlands.

The remainder of the promised £28bn of spending had not yet been allocated to specific projects and has been cut.

As a result of the changes, the plan has been reduced from its original £140bn over five years to just £23.7bn over that period.

Starmer also allocated money to the green plan from a previous promise to introduce a new, tougher levy on the North Sea oil industry.

While the Tory government has already introduced a North Sea levy, Labour has pledged to lift the rate from 75p to 78p and extend its end date from 2028 to 2030.

In 2023, Labour said it would have used that levy to fund a one-year freeze in council tax for a year, but it had not previously allocated the revenues from beyond the election.

Starmer said Labour would keep its target of ensuring that all UK electricity came from low-carbon sources by 2030.

On Thursday, the Labour leader was criticised by environmental campaigners for abandoning the £28bn figure after weeks of confusion about the party’s flagship economic policy.

Mike Childs, head of policy at Friends of the Earth, said cutting the policy would be “short-sighted” given the UK was already lagging behind other countries in the shift to a new low-carbon economy.

“For years, UK climate action has been undermined by dither, delay and lukewarm support from government. We urgently need real political leadership to confront the climate crisis,” he said.

The U-turn is particularly awkward for Starmer given he used the £28bn figure himself just days ago in an interview with Times Radio.

And last month Starmer insisted: “It’s absolutely clear to me that the Tories are trying to weaponise this issue, the £28bn, it’s a fight I want to have.”

But other senior Labour figures, including shadow chancellor Rachel Reeves, had stopped citing the number in recent weeks.

Reeves pledged in 2021, when interest rates were close to zero, that a Labour government would borrow £28bn a year for green capital spending. 

But after rates were increased sharply to tackle a surge in inflation, Labour became nervous about the financial implications of the pledge.

Reeves had previously already scaled back the policy, partly by saying it would gradually increase green spending to £28bn a year by the end of the first term of a Labour government and insisting it would be restrained by the party’s fiscal rules.