The party said any bank or building society choosing to offer the ISA would be under the obligation to reinvest the savings into housing, with the aim of building 125,000 starter homes over the course of a Labour parliament.
Chancellor George Osborne outlined plans for a Help to Buy ISA in his 2015 Budget speech, pledging a government contribution of £50 for every £200 that first-time buyers save for a deposit. The scheme caps a maximum bonus of £3,000 on £12,000 of savings.
Announcing the plans during a speech in Warrington, Labour said its Future Homes Fund would aim to tackle the housing crisis, an issue it believes the Conservatives have failed to address.
Labour estimated that its version of the scheme would cost the taxpayer £2.2bn.
Labour leader Ed Miliband (pictured) said: “We will make housing the top priority for additional capital investment.
“The next Labour government will create a new Future Homes Fund. The banks will benefit from the taxpayer support we will provide to help people save for their first home. In return, we will expect the banks to invest in homes for the next generation. Unlocking £5bn for 125,000 homes.”
However, housing minister Brandon Lewis called the policy “botched” with Labour acknowledging that lenders could not be forced to sign up to the policy.
“Today’s panicked announcement has already unravelled with Labour admitting banks and building societies can’t be forced to deliver the policy – and they won’t because this ill-thought through proposal from Ed Milliband will kill the Help to Buy ISA.
“Under Labour, house building fell to its lowest levels since the 1920s and today’s announcement would harm the first time buyers it claims to help,” he said.
