Labour plans 'Bank of the North' to unlock £500billion for businesses: Shadow Chancellor in Sunderland to announce proposals

John McDonnell. Picture by PA.
John McDonnell. Picture by PA.

The Shadow Chancellor is expected to announce Labour plans to create a "bank of the North" and other national and regional lenders in an effort to "unlock" £500 billion of investment for small businesses.

The move is aimed at "left behind" communities which voted to leave the European Union and who feel they have been forgotten by successive governments, according to Labour.

John McDonnell will visit Sunderland, where more than 61% of voters backed Brexit, to unveil the plan, which is focused on tapping into local knowledge and expertise to help struggling areas.

The shadow chancellor's visit comes as Labour's leadership battle enters a new phase and MPs prepare to split in a Commons vote on the renewal of the Trident nuclear deterrent.

The challengers to Jeremy Corbyn's leadership, Angela Eagle and Owen Smith, will face a parliamentary Labour Party (PLP) hustings event on Monday evening, where they will set out their stall to fellow MPs.

Mr Smith, who has promised to rewrite Clause IV of Labour's constitution to ensure it contains a commitment to tackling inequality, said he would happily bow out if Ms Eagle had more support from MPs to give her the best shot of toppling Mr Corbyn.

Mr Smith said the leadership contender with the most support among Labour MPs should become the unity candidate to take on Mr Corbyn, a view shared by senior colleagues.

But Ms Eagle refused to give the same assurance, instead insisting that she was in the best position to beat Mr Corbyn to become leader in a national ballot of members.

Meanwhile, the party's ruling National Executive Committee (NEC) is braced for a potential challenge over new rules for the leadership contest.

Mr Corbyn has criticised "unfair" changes which bar members who have joined since January 12 from voting and called for party officials to "see sense", suggesting he may mount a legal challenge.

The move effectively blocks more than 100,000 members who have joined the party since the EU referendum unless they sign up as registered supporters for £25.