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Labour leader pledges 'recovery bond,' big government and partnership with business

Tom Belger
·Finance and policy reporter
·3-min read
Labour opposition leader Keir Starmer set out part of his vision for the UK on Thursday. Photo: Jonathan Brady/PA via AP
Labour opposition leader Keir Starmer set out part of his vision for the UK on Thursday. Photo: Jonathan Brady/PA via AP

UK opposition leader Keir Starmer has vowed he would forge a "strong partnership" with business in government, providing start-up loans to 100,000 new businesses and launching a "British recovery bond."

Starmer made the pledges in a virtual speech on Thursday seen as one of his most important yet as Labour leader, amid growing party concerns about its poll ratings and dividing lines with the ruling Conservatives.

Under a Labour government, a new bond would give millions of people who'd saved during the pandemic a secure investment and a "stake in Britain's future," investing in infrastructure, Starmer said.

He said it was an example of the "active empowering government" Britain needed, saying the pandemic had shown both the power of government and level of public demand for state intervention.

"People are now looking for more from government, like they were after the Second World War," he said.

READ MORE: Calls for tax breaks on hiring as 1.9 million people out of work for six months

Starmer sought to underline Labour's traditional focus on big government and tackling inequality and insecurity, while also seeking to highlight his party's support for business and sustainable public finances.

Starmer said many low-paid workers' suffering and inability to afford self-isolation during the pandemic stemmed from "failed Conservative ideology," hostile to intervening in markets and public spending.

The Conservatives "simply don't believe it's the role of government to tackle inequality or insecurity," he said.

WATCH: Keir Starmer plays down poll worries earlier this month

“Inequality is not only morally bankrupt, it's economic stupidity too. A fair society will lead to a more prosperous economy. It's not the choice of one or the other as the Conservatives would have you believe."

But he also said his own party had failed to realise the only way to deliver social justice was through a "strong partnership with business," in a thinly veiled attack on his predecessor Jeremy Corbyn. "That mindset will change."

Starmer said leading economists believed the public finances should be put on a sustainable footing in the "medium to long-term," but warned tax rises or austerity in the short-term would choke off the recovery.

Labour would use next month's Budget to "protect family incomes and support business," extending a benefits top-up, the furlough scheme, business rate relief and a hospitality and leisure VAT cut.

READ MORE: Keir Starmer vows 'pro-business' government as he cuts ties with Corbyn era

His party would fix "gaping holes" in the Kickstart job scheme for unemployed young people, with Starmer suggesting it had created just one job for every 22 jobs lost among the young.

An extra £200m a year of funding would aim to double entrepreneur numbers backed by the government's Start Up Loans Company.

Labour officials said the bond proposal would work like previous National Savings & Investment Bonds, but funding would "go directly into the COVID recovery" through the government's planned National Infrastructure Bank. Bonds would have a long maturity but people would be able to withdraw savings early.

The bond proposal immediately faced criticism from commentators however, with one journalist asking if it would simply help the wealthy become richer and another noting its attractiveness would rest on rates offered. Simon French, chief economist at Panmure Gordon, pointed out the government already funded itself by issuing bonds.

Interest rates will only be "similar" to the rest of the market, but it will be attractive "given the opportunity to buy into Britain’s recovery and the extra security that this product offers," according to the party.

WATCH: Labour calls for Covid financial support extension