Labour leader Keir Starmer has announced plans for a new British Recovery Bond to allow people to “take a stake in Britain’s future” by investing billions of pounds in savings built up during the pandemic in communities, jobs and businesses.
Sir Keir said the Bond would provide financial security for millions of people as well as raising funds for investment in the science, skills, technology and manufacturing of the future.
Alongside a call for start-up loans for 100,000 new businesses across every region of the UK, it was the most eye-catching new policy in a speech setting out how Labour would approach the 3 March Budget.
Sir Keir said the Budget offered a “fork in the road” choice for chancellor Rishi Sunak between sticking to “the same insecure and unequal economy” seen over the past decade of Conservative rule or going forward to “a future that’s going to look utterly unlike the past”.
Vowing that Labour would not go “back to business as usual”, he said it was time for a restart equivalent to the post-war creation of the welfare state and NHS and the “homes for heroes” housebuilding drive under Clement Attlee.
Covid-19 had exposed “deep inequalities and injustices”, he said, adding: “We have to seize this moment to address them.
“I believe there’s a mood in the air which we don’t detect often in Britain.
“It was there in 1945, after the sacrifice of war, and it’s there again now.
“It’s the determination that our collective sacrifice must lead to a better future.”
Setting out his plans for recovery bonds, Starmer said that many Britons have “saved for the first time” during the coronavirus pandemic, if they held onto their jobs but reduced outgoings because they were working from home and unable to spend on travel or going out.
But he said Mr Sunak could not rely on these savers delivering a consumption-fuelled economic boom by spending their accumulated cash as soon as lockdown restrictions are lifted.
The Labour leader pointed to Bank of England warnings that only around 5 per cent of an estimated £250bn in additional household savings built up by June this year will be spent, with much of the rest sitting in savings accounts.
He said: “We need to use this Budget to build a more sustainable, secure economy for the long-term.
“The Chancellor is pinning his hopes for recovery on short-term consumer spending. But as the Bank of England have said, the vast majority of savings built up during the pandemic won’t be spent.
“That’s understandable. But it won’t help rebuild our country and it won’t do much to help savers.”
Starmer said that his Bond plan would “build on the spirit of solidarity we’ve seen in the last year (and) forge a new contract with the British people”.
Individual Britons would be able to invest in rebuilding a more secure economy, while the government would be providing financial security for millions of people, he said.
“It would provide security for savers and give millions of people a proper stake in Britain’s future,” said Starmer.
“This is bold, it’s innovative, and it’s an example of the active, empowering government I believe is needed if we’re to build a more secure economy.”
Sir Keir said that the Budget was “no time for a second wave of austerity (or) for tax rises on businesses and families”, which would “waste the sacrifices of the past year” by choking off recovery.
He confirmed Labour demands for the retention of the £20 uplift to welfare, central funding for local authorities to keep council tax down and an end to pay freezes for key workers.
A Labour budget would extend business rate relief and VAT cuts introduced at the start of the pandemic and due to expire in the coming months and would ease the burden of debt on businesses, he said.
Sir Keir said that the pandemic had “shifted the axis on economic policy”, with the public now looking for government to do more to provide security, support public services, invest in the future and fight climate change.
And he said Conservatives were “incapable” of delivering this because “they simply don’t believe it’s the duty of government to deliver social justice and equality – that’s why they’ll always fall back on the short-term demands of the market”.
But in a further signal of his pivot away from the policies of his predecessor Jeremy Corbyn, Starmer said that his vision for recovery would involve a Labour government working closely with business.
“For too long Labour has failed to realise that the only way to deliver social justice and equality is through a strong partnership with business,” he said.
And he promised: “Under my leadership, that mind-set will change.
“I believe in the power of active, enterprising government working alongside British business.
“Not because I believe business is something just to be tolerated or taxed, but because I know that government can’t do this on its own.
“And that a new partnership with British businesses is the only way to build a secure economy, strong families and a prosperous country.”
Labour said that the proposed British Recovery Bond would work like previous National Savings & Investments bonds, but money raised would go directly into the Covid recovery, rebuilding communities and supporting businesses through the new National Infrastructure Bank.
The Bond would have a long maturity, but savers would be able to withdraw money early.
Interest rates paid would be similar to those on the rest of the market, but Labour argues the Bonds would be attractive to savers because of the extra security offered along with the opportunity to invest in national recovery.
Loans for 100,000 entrepreneurial new businesses over the next five years would be delivered through an additional £1bn funding for the Start-Up Loans Company
Labour aims to double the number of loans provided by the Company from the average 9,500 each year since its creation in 2012 to 20,000 over the coming five years.
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