EXCLUSIVE: Bob Lyddon believes Labour’s reliance on Public Sector Net Liabilities “gives it an infinite capacity for new debt”.
Chancellor Rachel Reeves (Image: Getty)
Rachel Reeves risks saddling the UK with up to £7 trillion in hidden “zombie debt” thanks to the Government’s ambitious Net Zero targets, a financial expert has warned. Bob Lyddon, a tax consultant and former banker, claims Labour’s plans will result in off-balance-sheet liabilities which will ultimately land on British consumers and businesses.
In a report published today by Global Britain, titled Borrowing for investment’ – what signs we have of how this will manifest itself under the current Labour regime, Mr Lyddon warned that Labour’s approach disguises the true cost of the green transition. He said: “Labour’s ‘borrowing for investment’ will part-finance the Net Zero transition in a repeat of New Labour’s PFI and the EU’s InvestEU, and cost the UK nearly £7 trillion.
Prime Minister Sir Keir Starmer (Image: Getty)
“The Climate Change Committee’s Carbon Budgets are a dangerous fiction in that they exclude these financing costs.”
According to Mr Lyddon, Labour’s new fiscal rules mean only a fraction of Net Zero spending will come from Government borrowing. Instead, most of the money – estimated at £50 billion a year until 2050 – will be raised by individual projects in the private sector, effectively creating “shadow debt” that will never appear in official debt statistics.
He explained: “Compliance with Labour’s new ‘iron’ fiscal rules will mean that only a small portion of the total cost will be borrowed by the Government, injected into Great British Energy and the National Wealth Fund, and in turn ‘invested’ into Net Zero projects.
“Most of the investment cost will be raised by the projects themselves in a form of shadow debt, for which businesses and individuals will be made responsible, but without the debt featuring in any of the measures of the UK’s national debt.”
Rachel Reeves pictured during a recent visit to Yorkshire (Image: Getty)
Even Government borrowing won’t push up traditional debt measures, he said, due to Labour’s reliance on “Public Sector Net Liabilities” – a metric which nets off debt against the value of the assets acquired.
He said: “That gives Labour an infinite capacity for new debt as long as it fools investors and public credit rating agencies.”
Mr Lyddon predicted the rise of numerous “zombie” Net Zero firms reliant on debt financing but unable to generate sustainable revenues.
He explained: “We can look forward to many new debt-laden, zombie enterprises emerging, such as for carbon capture and electric vehicle charging, just as we have had Robin Hood Energy and Robin Hood Airport in the past.”
Ms Reeves has repeatedly defended Labour’s green investment plans, most recently during a visit to Yorkshire. She said: “Clean British energy is central to our economic mission to boost growth, cut bills and make Britain better off.
“Labour’s National Wealth Fund will partner with the private sector to invest in the green technologies of the future – helping reindustrialise communities that have been starved of investment for too long.”
She also insisted the plans would “secure Britain’s energy independence from tyrants like Vladimir Putin,” and confirmed they would comply with Labour’s fiscal rules.
But Mr Lyddon warned that the public would still end up footing the bill.
He said: “The Net Zero schemes will borrow most of their financing as expensive debt. That translates into a high cost for the scheme’s product – green energy – which UK businesses and individuals will be compelled to pay.”
He also took aim at the figures used by the Climate Change Committee, claiming the Carbon Budgets it relies on drastically understate the real cost.
“They only reflect the investment cost of the schemes, and then the supposed benefits,” he said. “They fail to project the financing costs which, if New Labour’s Private Finance Initiative is to be repeated, will be over five times the investment cost.”
Mr Lyddon put the total investment cost at £1.125 trillion over the 25-year period to 2050. “The benefits also fail to outweigh the costs either by a significant amount in any year, or at all in any individual year before the 2040s,” he said.
“If we apply the same 556% cost ratio as HM Treasury did to PFI, the full cost of the Net Zero transition reaches £6.95 trillion – more than double the size of the UK economy.”
Even that, he added, assumes Net Zero spending halts in 2050. “The cost will be felt until well into the 2060s.”
He concluded: “Labour’s plan will lock in a disastrous, punitive burden of energy costs on businesses and individuals – and one sustained for decades to come.”
