Sir Keir Starmer: Savings scheme would boost UK's recovery post-Covid

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media captionSir Keir Starmer says a new bond for money savers would provide a way for "people to invest in the future of their country"

Millions of savers would be given a chance to invest in the UK's recovery from the coronavirus crisis, under proposals set out by Sir Keir Starmer.

The Labour leader's British Recovery Bond scheme is the centrepiece of his alternative plan for "national recovery", ahead of 3 March's Budget.

He also proposed start-up loans for 100,000 new small firms, especially in areas outside the South-East.

The Conservatives said Sir Keir had stolen most of his ideas from them.

Chancellor Rishi Sunak will set out the government's plans to haul the UK economy out of the deepest recession in 300 years in his Budget speech next month.

But Sir Keir said the Conservatives were "incapable of seizing this moment", adding: "All we can expect from this government is more of the same. Labour would choose a different path."

The government said it has spent £280bn to help the economy through the pandemic, including tax breaks, grants and wage support for workers.

But Sir Keir told the BBC people would have to "judge the government on its record", with 10 years of "weakening of our foundations, the pulling money out of our public services, the underfunding of the NHS and the failure to fix care homes".

In an interview with the BBC's deputy political editor, Vicki Young, the Labour leader said: "You can't clap your keyworkers during a pandemic, then go back to business as usual and that is where this government will head.

"The first step has to be a recovery and a thriving economy, and if you put taxes up or you go for austerity, you will throttle that [before] you have even got to first base."

"We have been through too much here and there is a parallel with [World War Two], where people have been through sacrifice and solidarity and they want a better future, and that is what I am setting out the path to."

Conservative Party co-chair Amanda Milling, accused Labour of stealing her party's policies, adding: "After 10 months of Keir Starmer, all Labour has to offer is others' ideas, empty rhetoric and calling for things the government is already doing."

'Security for savers'

The main policy the Labour leader put forward was a British Recovery Bond.

A Labour government would offer people a savings account with the government at a competitive interest rate - similar to the previous National Savings and Investments bonds.

The cash raised would then be spent on rebuilding the country post-Covid.

It comes off the back of figures from the Bank of England, which showed households had accumulated over £125bn in excess savings by November 2020 - estimated to hit £250bn by June 2021 - but with only around 5% of the savings expected to be spent, with much of the rest sitting in savings accounts.

Sir Keir said this money could be used to "invest in local communities, jobs and businesses", as well as providing security for savers and giving "millions of people a proper stake in Britain's future".

The Conservatives said the policy was the same as one proposed by the Northern Research Group of Tory MPs, although that group's "Northern Recovery Bond" plan is not government policy.

But speaking to the BBC, Sir Keir said the chancellor was instead "pinning a lot of hope on the idea that those who have saved during the pandemic... are going to spend all that money in the short term".

He added: "I don't think that is realistic and I don't think the Bank of England does. What the bond does is provide a way for people to invest in the future of their country in a secure way, and obviously then releases money for infrastructure projects."

The pandemic has blurred political lines over the last year.

The Conservatives have been forced to become big-spending big government.

Meanwhile, Labour has been stuck between being criticised for being too supportive and, when it has been critical, being accused of carping from the sidelines.

The point of this speech was to take voters out of the extraordinary circumstances of the pandemic and remind them of the party politics of before.

Although, of course, not exactly those politics, as this was also an opportunity for Sir Keir to address some of the pressure to start setting out his vision for Labour.

So, there was a promise of continuing with significant government intervention in the economy but also of financial responsibility and of making business "pivotal".

The big policy reveal of the speech - British Recovery Bonds - neatly sums ups the aims Sir Keir set out of long-term investment, partnership and giving people a stake in society.

But it relies on those who have been left better off from the pandemic, rather than the many who have not.

Saving bonds are also known for being pretty low risk.

The choice of this as a policy to unveil is unlikely to pacify those who would like to see Labour being more radical.

Sir Keir also proposed to provide an extra £1bn of funding for the Start Up Loans Company, which provides finance for people wanting to launch their own businesses.

The Labour leader said the scheme had offered less than 9,500 loans per year since it started in 2012, with nearly £1 in £4 going into London - compared to just 5.7% going to the North East.

Sir Keir said targeting existing funding and tweaking the scheme would help to create 100,000 small businesses across the country.

The Labour leader also reiterated his party's calls for the government to:

  • Extend the weekly £20 increase to universal credit benefits, introduced last year, beyond its scheduled end-date on 31 March
  • Extend the business rates holiday and VAT cut offered to firms in the leisure and hospitality sectors beyond April
  • Give local councils "the funding they need" to avoid having to use new powers to raise council tax by up to 5%.

Budget pressures

A Budget had been expected to take place in autumn last year, but it was delayed until next month because of the coronavirus pandemic.

Covid restrictions have prompted the government to spend billions in unprecedented interventions aimed at keeping the economy afloat during the crisis.

This has pushed up UK debt to £2.13 trillion, equivalent to 99.4% of gross domestic product (GDP) - a level not seen since the early 1960s.

The chancellor is under pressure from MPs and industry groups to extend support measures, but also to spell out when and how the UK's debts can be paid down.

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