Sir Keir is set to announce the latest U-turn after months of extraordinary wrangling in the shadow cabinet.
The move emerged just a day after the leader insisted the package is ‘desperately needed’. But shadow chancellor Rachel Reeves has been striking a very different tone, warning that she will not allow any policies in the manifesto that are unaffordable.
The news has sparked fury among senior Labour figures, with mayors including Andy Burnham demanding that the proposals go ahead.
‘What is the change the Labour Party now offers?’ he said. ‘It’s very disappointing.’
He added: ‘It’s probably the most stupid decision the Labour Party’s made.’
Labour MP Barry Gardiner branded it ‘economically illiterate and environmentally irresponsible’, warning that the manifesto was in danger of being ‘bland’.
The £28 billion-a-year spending target was first unveiled in 2021, and last year Labour adjusted its original plan by saying the goal would not be until the second half of a first term in government.
The party has since insisted the pledge is subject to its fiscal rules, which include getting debt falling as a percentage of GDP, as it seeks to reassure voters it would handle the economy responsibly in government.
Confusion over the future of the policy has grown in recent weeks as some senior figures refused to refer to the £28 billion-a-year figure.
Ms Reeves has repeatedly declined to recommit to the spending pledge, instead highlighting the need for ‘iron discipline’ with the public finances.
However, as recently as Tuesday Sir Keir said the money was ‘desperately needed’ for the party’s key mission to achieve clean power by 2030.
The Conservatives have seized on the figure as a key attack line in the run-up to an election this year, claiming it would require taxes to rise.
It was first announced in September 2021 by Ms Reeves, who committed to spending an extra £28billion each year to help Britain tackle climate change if the party wins power.
The U-turn comes after an official Treasury costing suggested that part of the plan – to upgrade insulation for 19million homes – would cost more than double the party’s estimate of £6billion.
Chief Secretary to the Treasury Laura Trott said: ‘This is a serious moment which confirms Labour have no plan for the UK, creating uncertainty for business and our economy. On the day that Labour are finalising their manifesto, Keir Starmer is torpedoing what he has claimed to be his central economic policy purely for short-term campaigning reasons.
‘He must explain how he can keep the £28 billion spending when he is finally admitting he doesn’t have a plan to pay for it.
‘This black hole will inevitably mean thousands of pounds in higher taxes for working people. That’s why Labour will take Britain back to square one.’
Unite, the UK’s second largest trade union and a big Labour donor, said the ‘retreat’ would ‘confirm workers’ scepticism of the endless promises of jam tomorrow and it will be ‘alright on the night’ rhetoric on the green transition’.