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The ‘British Recovery Bond’: Post-Covid economic saviour or rearranging deckchairs on the Titanic?

 

  • Labour leader Sir Keir Starmer has backed the creation of a ‘British Recovery Bond’ to help rebuild the UK economy post-Covid (https://labour.org.uk/press/starmer-sets-out-plan-to-give-british-people-a-stake-in-our-national-recovery/)
  • Details scant at this stage but reports suggest policy would be similar to National Savings & Investments (NS&I) bonds
  • Starmer says the bonds “could raise billions to invest in local communities, jobs and businesses” while also giving “millions of people a proper stake in Britain’s future”
  • However, any extra returns provided to savers via a bond would mean additional costs for the Exchequer

Tom Selby, senior analyst at AJ Bell, comments:

“You can see the appeal of a ‘British Recovery Bond’ to a Labour Party attempting to establish its economic credentials under a relatively new leader.

“On the face of it this policy ticks three key boxes for Sir Keir Starmer – boosting the funding available to rebuild the country post-Covid, providing a return to hard-working savers keen to play their part in the recovery, and with a dollop of patriotism thrown in for good measure.

“However, it is important to be realistic about what this could mean in reality. The creation of a ‘British Recovery Bond’ would not spin gold out of thin air – it is simply an alternative way of raising finance.

“Furthermore, the more attractive the interest rate offered to savers, the worse the deal for UK taxpayers – the same people who would presumably be encouraged to buy the bonds.

“So while this policy has an obvious political attraction, in terms of addressing the £400 billion+ hole left in the country’s finances by the pandemic it feels like rearranging the deckchairs on the Titanic.”

 

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