Politics » The shadow chancellor’s pitch to finance leaders

When asked for his vision of how a Labour government can create future prosperity for Britain, the shadow chancellor insists that he and his party offer certainty in the face of Brexit.

By remaining within a customs union, and having a close working relationship with the Single Market, he says “we can plan for the long term of our economy on the basis of frictionless, tariff-free trade”.

Beyond the immediate fears of a no-deal Brexit, McDonnell asserts Labour’s position, cobbled together at its recent party conference, offers the route to building the economy.

He says this will happen through investment in infrastructure, new energy programmes and technology to navigate the fourth industrial age.

He’s keen to stress inclusiveness, where plans for a national investment bank can sit beside the current financial services sector- delivering the necessary investment to drive the new economy.

“We want people to come into government with us”, he says, referencing plans for a strategic investment board combining the Treasury, the Bank of England, business leaders and trade union leaders to find ways to secure investment needed to tackle “the productivity crisis that we have at the moment,” he says.

Mood for compromise

For someone who has declared his enthusiasm for Marxism in the not too distant past, McDonnell reveals an instinct for compromise- perhaps sensing a real chance of power as the prime minister ties herself in knots trying to solve the impossible Brexit conundrum.

On the workforce equity plan that so enraged business when revealed at the recent Labour party conference, he says he welcomes the ideas of anyone “who has an alternative route to secure those objectives”.

“We’re looking at a stakeholder economy, where everybody has a stake in their company and the economy overall. Then we’ll have more productive companies because people will be more committed and you get longer term decision-making rather than short-termism that has plagued our economy for so long,” he says.

On nationalisation he says water, railways and the Royal Mail are the main targets with claims of public support for nationalisation of 70-80%, as “people feel they’ve been ripped off over the years by privatisations. You can understand how angry they are,” he says.

But he insists “there’ll be discussions and consultations that will show what we’re going to do.” With energy he says there’s plans for alternative energy sources on the German model.  “That’s what we’ve always argued for,” he says.

There are public consultations planned. “We have a completely open door to anyone who’s got any views on this, just come and see us and talk to us about it,” he says, sounding almost friendly, nothing like “the most dangerous man in Britain,” as he has recently been described.

Even bankers are welcome at the table. “I’ve been meeting with various asset managers, chief executives of banks. I think we’re all on the same page,” he says.

On the accountancy profession, McDonnell wants to see reform, namely a challenge to the dominance of the Big Four accounting firms, which recent scandals such as the collapse of Carillion have been partly attributed to.

This week he met Competition and Markets Authority (CMA) chair Andrew Tyrie who is leading a review of the sector. A report into the accountancy profession commissioned by Labour is published in a month. “There’s a whole range of options there as regard to the Big Four, about how you break them up, and whether there is a role for the state in doing some of these audits,” he says.

Driving change

Where industrial and foreign policy meet, McDonnell is forthright. He calls on the UK government to cut ties with Saudi Arabia, despite the implications for thousands of UK employees at defence giant BAE Systems.

The shadow chancellor says BAE executives should not be attending the imminent Future Investment Initiative conference in Saudi Arabia, dubbed the “Davos of the desert”, that many politicians and business leaders have pulled out of in recent days. “I think they shouldn’t be there,” says McDonnell.

“We shouldn’t be having any dealings with Saudi Arabia until two issues are resolved. One is the allegations of the attack on Jamal Khashoggi the journalist, and the second is what’s happening to the large numbers of people whose lives are at risk in the Yemen,” says McDonnell.

“We want to protect jobs as much as we possibly can and ensure the defence industry is protected for the long term, but we can’t be selling to a country that is perpetrating war crimes against the people of Yemen,” says the shadow chancellor.

“We can’t stand to one side, when we are talking about millions of people in Yemen whose lives are at risk, including large numbers of children as well,” said McDonnell. “I don’t think any British workers, wherever they are, would want to be seen aiding or supporting the Saudi regime.”

Asked if he would be prepared to sacrifice jobs of UK workers, many of them unionised, McDonnell says: “I don’t think it has to come to that. I think we can mobilise sufficient global pressure, and I think we could take the lead on doing that, we could instigate significant change in the activities and the role of the Saudi regime,” says the shadow chancellor.

Asked about his view on Trident, given that BAE is one of the main contractors in Britain’s nuclear submarine programme, McDonnell says: “My position is that I’ve always been opposed to nuclear weapons, but I’m a democrat as well. Labour party policy at the last election was to retain the nuclear deterrent and that was overwhelmingly the policy at conference. I abide by the decision,” he adds.

In light of the Intergovernmental Panel on Climate Change’s (IPCC) stark warning last week about the need to address the fast-looming point of no return for the planet on climate change, the shadow chancellor says of oil giants BP and Shell: “We’ve got to save our planet and those companies can’t ignore the science any more. They’ve got a role to play,” he says.

On tax avoidance McDonnell wants to empower HMRC, following Labour’s publishing two years ago of a tax transparency enforcement programme, with a supervisory board and stakeholder involvement. “It was our side that forced the government into accepting the Magnitsky clause into the last piece of financial legislation,” he insists.

“It was our amendments that forced the government into looking at overseas property registers. They dragged their feet. But if you look at our team in the Commons and our team in the Lords as well, we’ve been leading on it,” argues the shadow chancellor.

The new paradigm

What plans does McDonnell have to bolster industries and regions that will almost certainly suffer as a consequence of Brexit? “If you look at our proposals running up to the last election, we put forward an investment programme of  £250bn over the first ten years, the national investment bank we expect  to deliver on another £250bn, so a £500bn investment programme would be for  our infrastructure,” he declares.

“We got that figure from recommendations from the CBI,” says McDonnell. “So as soon as we go into government, we’ll be starting that investment programme. If you look at what we’re doing in terms of our revenue budget, a lot will come from corporation tax increases (planned to rise from 19% to 26% under Labour).

Labour is undertaking a review of the Green Book, the guide to Treasury decision-making, to instil a transformative agenda, “based on the industrial strategy that will be published,” says McDonnell. “There’s two key missions in the industrial strategy. Our investment in innovation and investments in projects to tackle climate change is one. Another is that decisions that have to be made on regional considerations as well. At the moment, the bias towards London and the south east has to be overcome,” he insists.

“One of the reasons for the Brexit vote was that large numbers of people were completely left behind by a lack of investment by central government, what they would describe as the establishment. We’ve got to break that and make sure there’s fair investment right through the country,” says the shadow chancellor.

Every other Saturday, McDonnell is undertaking meetings of 150-250 people in towns, talking about their local economy and what they need. “People outside London and the south-east feel so neglected. Decisions in Whitehall and Westminster have not reflected their needs. So we’re asking people in their local area to work up their local economic plans, which our economic policy paper will be based on,” he says.

In the meantime, the shadow chancellor is keeping tight-lipped about Labour’s position on the prime minister’s Chequers plan on Brexit in the forthcoming meaningful vote. “We’ll see what Theresa May brings back from Brussels. I think she’ll bring back some form of fudge, and that won’t be good enough,” he says. “If we think the proposals she brings back will protect jobs and the economy, we’ll vote for it. If it doesn’t protect jobs and the economy, we can’t support it,” he states.

Is he fearful of a backlash on the first day of a labour government, resulting in a run on the pound? “It won’t happen, full stop,” he insists.

 

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