Opinion: ‘Build country back up with bonds...’

Bonds have a long and storied history. They were traditionally deployed during wartime to encourage the public to contribute to the national effort: rather than keep savings in a bank, citizens could invest in guns, tanks and bombs to help defeat a foreign foe. They helped get Britain through its national moments of crisis.

Our present situation is precarious: the necessities of lockdown have ravaged our economy.

Much of our infrastructure needs to be modernised: we desperately need better broadband, improved roads and transport links. Labour believes it’s time to bring back bonds to rebuild our country.

Labour proposes creating a new Recovery Bond, which will then be used by a new National Infrastructure Bank.

The bank will fund projects which will give us the infrastructure we need to kickstart recovery. In many respects, this is a re-establishment of the link between finance and the British people: when we put money into our savings accounts, there is an expectation that this will be loaned to businesses to build themselves up. This is only partially true: as the 2008 financial crisis showed, at least some of this money goes towards more speculative forms of investment. It is by no means certain that we get improvements we all need.

The money is there: figures estimate that British households will have accumulated £250 billion in savings by June 2021. What we do with it will determine whether we prosper or stagnate; it’s clear that the Chancellor would like us to spend it on goods and services.

By investing it in infrastructure, we are creating an opportunity to grow the economy as a whole; better infrastructure means a more educated workforce, goods that arrive more quickly, better communications, and jobs for those working on these projects. Meanwhile, the families that have accumulated these savings continue to build up reserves for the future.

How would the bonds work?

The bonds would be assigned a market level rate of return; purchasers could draw on the funds early, however that would diminish the earnings accrued.

This is a typical market practice.

A similar scheme has been utilised by other countries to fund their infrastructure projects; “municipal bonds” are long-established form of investment in a number of countries. America created “Build America Bonds” in 2009 to help bolster economic recovery after the financial crash.

The Labour Group in Peterborough believes that we should issue a local “Transformation Bond” with an initial fund value of £50 million. If people wish to put more savings into this fund, the size of the fund will be increased. A bond could also be created for an economic green recovery and our city could lead the way on this. The bond will allow Peterborians to have a stake in the future prosperity of the city alongside a decent return on investment.

There is a unique confluence of circumstances: we have a need for productive investment, the savings are there, and yet we have a Chancellor who would like us to just go down to the shops.

It’s a shame: this opportunity could be used to build back our country in a better way.

We don’t necessarily need to increase taxation to have better infrastructure: we merely need to build a bridge, so to speak, between the savings and patriotism of the British people, to a means by which that can be effectively deployed.