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What would Keir Starmer’s ‘British Recovery Bond Scheme’ look like?

What would Keir Starmer’s ‘British Recovery Bond Scheme’ look like?
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Labour leader Sir Keir Starmer has pledged to offer millions of British savers a stake in the country’s future by inviting them to invest in a new Covid recovery bond, should he become prime minister. The proposed ‘British Recovery Bond Scheme’ would provide cash for use in rebuilding the country post-Covid.

Here’s what you need to know about this proposed scheme, including what it might look like.

What is the British Recovery Bond Scheme?

In a major speech about his party’s vision for the future of Britain, Starmer said that he would create a new British Recovery Bond Scheme. He argued that doing so would raise billions of pounds to “invest local communities, jobs and businesses” and used to “help build the infrastructure of the future”.

The Labour leader added that it would also “provide security for savers and give millions of people a proper stake in Britain’s future”. 

Starmer’s plan comes just a few weeks after the Bank of England released a report showing that UK households had accumulated over £125 billion in excess savings by November 2020.

The BoE projects that savings will hit £250 billion by June 2020. However, it also predicts that savers are only likely to spend 5% of those savings.

Most of the money is likely to remain in savings accounts earning low or no interest. The proposed bond would tap into these pent-up savings and use them in rebuilding the country.

How would the British Recovery Bond Scheme work?

The bond would be similar to the National Security and Investments (NS&I) premium bonds, but the money would go directly towards Covid recovery.

It would have a long maturity, but savers would be able to withdraw their savings early.

Starmer has not stated the minimum amount savers would need to apply for the bond.

Interest rates offered would be similar to those on the rest of the market. However, the bond is likely to be more attractive to savers because of the security it offers.

Labour said that previous products of the same nature have raised billions of pounds. An example is the now-defunct pensioner bond which raised over £10 billion.

Would it be worth investing in Starmer’s bond?

Government bonds have long been viewed by experts as among the safest assets to invest in. That is because they are backed by HM Treasury, meaning there’s little risk of default.

Bonds are also more appealing to investors than savings accounts, for example, because they offer a higher interest rate. They also come with a predictable income stream, such as every six months.

So, for investors who want a secure investment with a decent rate of interest and regular income, and who also want to partake in the rebuilding of their country, the British Recovery Bond Scheme might be worth considering if it were to become a reality.

What other investment options are out there?

If you are looking for a way to potentially make even greater returns on your savings, and if you can withstand a little risk, consider investing in stocks.

The stock market has quite a strong track record of helping investors build wealth over the long term. It’s important to bear in mind, though, that past performance is not a reliable indicator of future returns.

Combined with a tax-efficient vehicle like a stocks and shares ISA, where there is no tax on your profits, the potential to grow your money increases.

But as with any form of investment, be sure to do your research first.

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