The government is considering cutting funding for GB Energy in June’s spending review in a major blow to energy secretary Ed Miliband.
State-owned GB Energy has been tasked with decarbonising the electricity grid by investing in and operating clean power projects.
The government pledged £8.3bn over the course of the current parliament. However, it was only given an initial £100m tranche in October’s Autumn Budget.
The Financial Times reported, citing sources familiar with the discussions, that ministers are now considering whether they can afford to give GB Energy the entire £8.3bn.
The decision comes as Sir Keir Starmer looks to prioritise defence spending amid shaky relations between Ukraine and the United States.
One potential outcome could see the UK Treasury cut the £3.3bn previously set aside for GB Energy to fund low-interest loans via local authorities, according to the FT.
Ministers are reportedly carring out a “zero-based review” of all government spending to re-focus priorities. One government official told the FT a stock response “HMT refuses to confirm X” could now be “applied to every single spending commitment” because of the spending review.
The decision to axe funding for GB Energy is likely to infuriate Ed Miliband, who is already having to toe the line following the government’s decision to back expansions at Heathrow, Gatwick and London Luton Airport.
People familiar with the situation told the FT Miliband was “furious” after being told about the plan before Christmas, but that he would not resign over Heathrow given the project could be halted by the Planning Inspectorate.
The government has been approached for comment.