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Under Mr McDonnell’s plan, the EU would increase funding for housebuilding.
And Mr McDonnell says the project could create 65,000 jobs.
He added: “Labour wants to remain and reform the Europe so that we can better use the levers of power inside the EU to ensure our country punches its weight in the world and better delivers for all working people.
“The opportunities to build a better world will be with a Labour vote to remain in the EU not a Tory Brexit .
“Labour wants to build a better Europe and that can start by using the EU to increase investment that could be used to build more homes here, and help tackle the Tory housing crisis.
“With George Osborne clinging to his failed austerity policies, and cutting investment despite the overwhelming consensus from businesses, trade unions, and economists to support boosting it, there is an urgent need to deliver the investment spending we need for 21st century infrastructure like high speed rail and high speed broadband, as well as solving the housing crisis.
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“The Tories are failing to take the opportunities that the European Investment Bank provides, leaving Britain with a lower than average investment from this shared institution.
“With the EU now committed to expanding investment across Europe through the £250bn Juncker Plan, we need a government that will step up to the mark and deliver for working people here.
“The money’s there but the Tories aren’t making the most of it.
“If they weren’t consumed with bickering over a Tory Brexit , then the Tories could raise their game and help make sure that increased investment helps put in place the foundations for a secure economy, not the recovery built on sand that George Osborne has created.
Increasing EIB investment in the UK to the EU average would mean an extra £2.4bn a year, which could help build 160,000 new homes and create 65,000 jobs every year to address the housing crisis.
“Labour won’t stand by and allow Britain’s potential in Europe go to waste under a Tory Brexit .”
Mr McDonnell would use the EU to double the EIB’s commitment to funding social housing provision – currently 20,000 homes – to bring the UK’s per capita share of funding in line with the EU average.
If the UK moved to EU average of per capita EIB investment then it would increase funding from £5.6bn last year to £8bn.
This could mean a possible annual £2.4bn increase in funding (almost £10bn by 2020) available for UK businesses, which could then be used to help tackle things like the UK’s housing crisis.