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End austerity in public services, John McDonnell tells chancellor McDonnell says big business sees Labour as government in waiting
(about 4 hours later)
The shadow chancellor, John McDonnell, has demanded an emergency budget to end austerity in public services. The shadow chancellor, John McDonnell, argued that big business now trusts Labour more than the government on the economy and Brexit as he launched his vision for a budget next week involving more investment and an end to austerity.
McDonnell said he feared next week’s budget would not be ambitious enough to tackle the scale of funding shortages in housing, health, and law and order. Answering questions after a speech in Westminster where he called for Philip Hammond to “make the decisive break with the failed past”, McDonnell said recent discussions with business groups, investors, asset managers and others had left him with a clear impression.
“My worry is that this budget will be more about saving Theresa May’s job and Philip Hammond’s job rather than addressing the real needs of our country,” he told BBC Breakfast on Thursday. “It’s interesting – the message I’m getting is that they’re coming to us for reassurance about the long-term future of our economy,” he said. “They obviously now increasingly see us as a government in waiting.
Citing warnings from headteachers, police chiefs and the head of the NHS, he said: “We need an emergency budget to tackle the very real emergencies our public services are having to address.” “We’ve been trying to say to them: what you see is what you get. We’ve outlined our plans, we want to work with them as partners, and there’s nothing up my sleeve.
Speaking to Radio 4’s Today programme, McDonnell confirmed Labour’s manifesto commitment to a £17bn annual increase in public spending, paid for by tax rises for the better off and a reversal of cuts to corporation tax. “That gives them, I think, confidence and assurance, which they’re not getting from this government. That’s about investment, and how we manage the economy in the interests of everybody.
But he also suggested Labour would increase its commitment to raise an additional £6.5bn by tackling tax avoidance, in the wake of the Paradise Papers revelations. “They’re coming to us with the same arguments about infrastructure and investment in particular, and skills. We’re working in partnership with them about developing our plans, so when we get into government we can hit the deck running.”
While McDonnell and his team have been actively courting groups such as the Confederaton of British Industry (CBI) in recent months, there remains significant scepticism about some of Labour’s plans.
After McDonnell spoke at the CBI conference in September, the organisation’s director general, Carolyn Fairbairn, warned that some Labour policies such as nationalising certain industries “will send investors running for the hills, and puts misplaced nostalgia ahead of progressive vision”.
McDonnell also argued that Labour’s Brexit plans, including a demand for a guaranteed two-year transition period and ruling out a no-deal Brexit meant big business was “looking to us for security”.
Given government splits on Brexit, it was almost impossible to know who was leading the negotiating stance, McDonnell argued.
“There’s different factions forming as a result of different conspiracies cooked up in the corridors of power that seems to bring forward a different strategy every day,” he said. “The lack of consistency means our country’s economy is being put at risk.”
In his speech, McDonnell said Hammond and his Treasury team should produce a budget next week that would ease austerity, increase spending on public services and provide money for investment.
Cuts were affecting the NHS, schools, police and other areas, he said, while housing was in crisis and more families were living in poverty.
“There has to be a genuine and decisive change of course,” he said. “This government may be weak, but Britain doesn’t need to be. It needs strong, effective action to properly deal with the challenges we face as a nation.”
Speaking earlier on BBC Radio 4’s Today programme, McDonnell confirmed Labour’s manifesto commitment to a £17bn annual increase in public spending, paid for by tax rises for the better off and a reversal of cuts to corporation tax.
But he also suggested Labour would increase its commitment to raise an additional £6.5bn by tackling tax avoidancefollowing the Paradise Papers revelations.
He said: “I cut that down to £6.5bn to give it a bit of leeway; now we know from the Paradise Papers it must be significantly more than that. Even the government now is going to have to address this, because people will feel that unfairness of having their public services cut whilst this tax avoidance is going on.”He said: “I cut that down to £6.5bn to give it a bit of leeway; now we know from the Paradise Papers it must be significantly more than that. Even the government now is going to have to address this, because people will feel that unfairness of having their public services cut whilst this tax avoidance is going on.”
McDonnell ruled out setting aside funds to cushion the economic impact of Brexit. “We don’t think we need to set money aside because we can get a good deal, which will maintain tariff-free access, allow our economy to grow and work in a new collaborative relationship with our European partners,” he said.McDonnell ruled out setting aside funds to cushion the economic impact of Brexit. “We don’t think we need to set money aside because we can get a good deal, which will maintain tariff-free access, allow our economy to grow and work in a new collaborative relationship with our European partners,” he said.
He refused to be drawn on whether Labour would pay a €60bn (£54bn) divorce bill to leave the EU. “How can anyone comment on this when the government won’t publish the information upon which we can take considered and rational decision?” he said. He refused to be drawn on whether Labour would pay a €60bn (£54bn) divorce bill to leave the EU. “How can anyone comment on this when the government won’t publish the information upon which we can take a considered and rational decision?” he said.
Challenged on a Labour conference suggestion that he would introduce capital controls to stop a run on the pound if Labour came to power, he said: “There is never going to be a run on the pound. Business leaders are coming to me for certainty and the one thing they are getting from us is openness and transparency about what we want to do, and they are welcoming it.”Challenged on a Labour conference suggestion that he would introduce capital controls to stop a run on the pound if Labour came to power, he said: “There is never going to be a run on the pound. Business leaders are coming to me for certainty and the one thing they are getting from us is openness and transparency about what we want to do, and they are welcoming it.”
Speaking to Sky News, McDonnell said business leaders and some Conservatives now accepted that austerity was damaging the economy. “I think there is a growing consensus now that austerity has to end. We have to invest for the future,” he said.
“Our services are facing an emergency on the ground, so this should be an emergency budget that concentrates on investing in our public services. Lifting the pay cap because things are so serious now.”
Speaking on BBC Breakfast, McDonnell repeated warnings of the scale of the crises facing public sector leaders.
“We have had some real messages from the frontline of our public services over the last few weeks: 5,000 headteachers writing to the prime minister saying we’ve got to stop the cuts in our education – they are having to send out letters to parents asking for donations; we’ve had the chief executive of the NHS [setting out] the scale of the crisis that we have in our NHS; and … the person who is responsible for advising the government on terrorism [is] saying that we can’t combat terrorism if we have this level of police cuts.”
Later on Thursday, the government will set out measures to help tackle the housing crisis by removing housing association debt from the government’s balance sheet.
McDonnell dismissed this as “creative accountancy”, saying: “What we need is a large-scale housing programme led by local councils. We need a million new houses under the next period of government [including] 100,000 affordable houses, social housing, each year. We think we can build that on the basis of bringing together local authorities and letting them have the powers now to get out there and start building again.”