McDonnell promises to recognise good businesses and give them greater investment

John McDonnell will outline a new plan to recognise good business and help small companies with investment through a network of publicly owned local banks in a speech to the London Chamber of Commerce today.

The Shadow Chancellor will say that a Labour government will launch a “Good Business” kitemark scheme that companies that pay their taxes transparently and properly and pay their employees at least the living wage can apply for.

He will also call on the Chancellor to reverse fully the cuts to working families’ incomes he announced in the summer budget, warning that they will take £4.1bn of spending power out of the economy.

He will point to research by the Institute of Fiscal Studies showing cuts to Universal Credit will see families losing similar amounts to what they would have lost through the government’s planned cut to Tax Credit, which George Osborne abandoned last week.

McDonnell’s speech is the latest in a series by the Shadow Chancellor fleshing out his vision of how a fairer, more productive economy can be created by greater government-directed investment.

“Our current financial system is plainly not fit for this purpose,” he will say. “Lending to small businesses has fallen and fallen again, year after year. Even with a recent improvement, lending is down £49bn on 2008 levels.”

“We think that regional and local banks, properly managed with a public service mandate, are part of the answer for small businesses,” he will add.

“We want banks that know their customers and understand the needs of their local businesses. Germany’s network of highly successful Sparkassen, publicly-owned local banks in tune with their communities, provide one model.”

“The individual branches support each other to provide security, with a combined balance sheet of over 1trillion euros. But the banking licence for each branch means it has to lend only to local and regional businesses.”

McDonnell will also say that “Labour has offered George Osborne a way for him to reverse his own cuts – by targeting a lower surplus and reversing his giveaways to the wealthy, but we’ve yet to receive an answer.”

“In place of austerity, Labour will seek to balance spending on the government’s day-to-day at a pace compatible with fair and sustainable growth, whilst making sure government can still use its full powers to invest in vital infrastructure, science, and skills.”