Shadow chancellor also promises to build network of regional banks to ‘rebuild Britain’s industries after years of neglect’

John McDonnell has pledged that Labour will mobilise £500bn of investment and lending from the creation of a new national investment bank to help the UK economy recover post-Brexit – with £350bn coming directly from the public purse.

The shadow chancellor also promised to build a network of regional banks, inspired by Germany’s government-owned development bank, which he said could “rescue Britain’s communities from decay and rebuild Britain’s industries after years of neglect”.

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Speaking in Sunderland, the Labour heartland that delivered a resounding vote for Brexit, McDonnell said his pledge would lay the foundations of a new economic model for British prosperity under the party.

“Today I am making a firm pledge: on coming to power, Labour will set up a national investment bank, and a network of regional banks whose aim is to help mobilise £500bn into the economy and transform Britain,” McDonnell, a key ally of Jeremy Corbyn, said.

One of Corbyn’s rivals for the Labour leadership, Owen Smith, launched his campaign over the weekend with his own spending pledge, a £200bn infrastructure investment package which he termed “Britain’s New Deal”.

However, McDonnell said the UK’s infrastructure requirements over the next decade or more come to £500bn of additional spending.

He said Labour would pledge an initial £250bn of government funding over 10 years as well as £100bn for new public national and regional banks. “We wouldn’t just reverse the planned cuts to investment,” he said. “We would lay the foundations for a new economy.”

Facebook Twitter Pinterest Owen Smith, one of Corbyn’s rivals for the Labour leadership. Photograph: Matthew Horwood/Getty Images

McDonnell said the new bank, managed independently of government, would be able to raise the financing needed to deliver infrastructure on the scale required. In the process it would deliver 100,000 new jobs in the north-east alone.



“By mitigating the risks and giving a firm, government-backed commitment to funding, it will draw in the private financing that has otherwise been wary of financing infrastructure in the UK,” he said.

A regional “bank of the north” could also deliver financing for local infrastructure and support lending to local businesses, he said.

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McDonnell said infrastructure spending per head in the north-east was just £414 compared with £5,300 in London. “Even raising public investment in the north-east to the national average per capita would increase it by £7bn a year,” he said. “We should be aiming for nothing less than a transformation of the economies of the north.”

The shadow chancellor also urged the government to act in the short-term to safeguard the £10bn of EU regional funding now at risk after the vote to leave. “Either it should ensure funding remains in place, or it must guarantee the funding itself,” McDonnell said.

Smith and his fellow challenger, Angela Eagle, are taking part in a special parliamentary hustings on Monday to help MPs determine if a single candidate should be on the ballot against Corbyn, who will also attend.