Labour plans new bank to fund community groups

Liam Byrne MP in his office
Treasury chief secretary Liam Byrne is to give a Progress lecture designed to reject David Cameron's image of a broken Britain. Martin Godwin/freelancer

A new bank that could help fund community groups and stimulate a stronger civil society is being examined by ministers as part of a drive to give more power to local communities, Liam Byrne, the Treasury chief secretary, will say tomorrow.

He is due to give a Progress lecture tomorrow evening at Kings Place, home of the Guardian, in a speech designed to reject David Cameron's claim that Britain now faces a choice between a big state and a stronger civil society.

Byrne will argue instead the two need to work together to combat the whirlwind of globalisation. He will liken Cameron's vision of a weaker state and a broken Britain to the vision set out by Ronald Reagan, including the Republican's attack on "welfare queens" 30 years ago.

He will claim Reagan's call for responsibility ended by ignoring every cry for help, and will insist that public money is necessary to give people confidence, skills and security. He will argue that Labour has overseen a doubling in the size of the so-called third sector, including the voluntary sector. But he will say that Labour, if re-elected, needs to do more to force Whitehall co-ordinators to allow people to make more decisions at a local level: "We should be flexible enough to put in the lead the right agency to make a difference – and declutter the rest of the landscape. This points us to potentially the need for a different shape of government harnessing the new ways of doing business in the network era."

He will also disclose that, with the communities secretary, John Denham, he is looking to map the strength of local civil societies. In the US and elsewhere, an index of the strengths of local voluntary groups is being drawn. Byne also reveals that "we are exploring how to stimulate local capital for local organisations, be that through a social investment wholesale bank to stimulate a social capital market, or through action to generate new capital markets for community action".

He will argue that Labour has to accept the home truth of a better partnership between state and society requires action on security . "It is hard to ask communities to take control of regeneration when they do not feel safe to walk in their streets and use public spaces."