Rachel Reeves has effectively cut £2.5bn from the government’s national energy company by sharing the £8.3bn it was promised with a separate nuclear power body set up by the Conservatives.
The Labour manifesto hadpledged the full amount to Great British Energyto invest in clean power projects. However, the chancellor’s spending review said the company would share this funding with a separate body tasked with spearheading Britain’s nuclear renaissance.
The Treasury’s spending plans said the “two allied publicly owned companies with a shared mission” would spend the £8.3bn on “homegrown clean power” including £2.5bn to help the UK develop a new generation of small modular nuclear reactors.
The day before the spending review the government quietly renamed Great British Nuclear, which was set up by Boris Johnson’s government in July 2023, as Great BritishEnergy– Nuclear. But despite the name change the two bodies remain separate entities.
A nuclear industry source said Great British Nuclear was renamed soLabourcould “make the manifesto commitment add up”.
Another nuclear industry source said they expected that the name change would in time lead the nuclear company to be “folded into” GB Energy entirely, although others argued the two bodies would remain separate.
The move has ignited a row between the government’s officials and GB Energy over the need to share funds that were promised to the newly established energy company.
GB Energy was launched to great fanfare, with itschair, Jürgen Maier, pledgingthat it would become a major power generator, running its ownwindfarms, tidal power and carbon capture schemes.
A source close to GB Energy said Reeves had in effect “restricted” the its scope by depriving it of funds that could have gone to renewable energy projects.
GB Energy will now be left with about £6bn of capital to invest, of which two-thirds is earmarked for “financial transactions” – loans, equity investments or guarantees to the private sector – which are likely to be tightly overseen by the Treasury, potentially further curbing its independence.
The move follows months of simmering tensions at the heart of government involving the energy secretary, Ed Miliband, the Treasury, and GB Energy, and Maier, a former Siemens UK chief executive.This year, the Financial Times reported that cuts to the planned funding for GB Energy were being considered, before the Treasury was forced into issuing a full-throated commitment to its initial £8.3bn capital injection.
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Labour first signalled plans to merge the publicly owned bodies before the 2024 general election. In March, the party set out plans for GB Energy to “absorb the functions of Great British Nuclear” as one of the company’s priorities.
In separate strategy documents, Labour said it was exploring how the two bodies could “best work together, including considering how Great British Nuclear functions can be aligned with Great British Energy”.
A Whitehall source said: “This has always been part of our plans, but I think perhaps not everyone was paying attention.”