The shadow chancellor said the party’s tax strategy would shift the burden away from wages and towards those who hold wealth, and promised a Labour government that would actively intervene to assist business.
McDonnell’s speech won a standing ovation from delegates at the Labour conference, as he concluded with the rallying cry: “That’s our vision to rebuild and transform Britain. In this party you no longer have to whisper it: it’s called socialism.”
The most striking new policy in his speech to the party’s annual conference in Liverpool was the proposal for a national living wage with the amount set by a review body “at the level needed for a decent life”.
“Independent forecasts suggest that this will be over £10 an hour. This will be a fundamental part of our new bargain in the workplace,” McDonnell said, prompting cheers and clapping.
Last year, George Osborne introduced plans for a living wage for those over 25, which would rise to £9 an hour by 2020. McDonnell has previously called for a £10 an hour minimum wage, but Monday’s speech was the first formal outlining of the plan.
Len McCluskey, general secretary of the Unite union, said McDonnell’s living wage plan was “music to the ears of the millions of low-paid workers who are getting poorer under this government”.
But Carolyn Fairbairn, the CBI director general, said businesses would be wary of McDonnell’s “combative” tone and focus on “extensive intervention”.
“The best way to increase pay and living standards across the UK is to support firms to improve productivity,” she said. “We already have an expert independent Low Pay Commission, which should have responsibility for setting statutory wages levels.”
There would be proposals in the scheme to help businesses implement the living wage, McDonnell said, to make sure there was no negative effect on jobs or hours.
He also unveiled measures to crack down on tax avoidance, including more resources for HMRC inspectors, measures against tax havens and a commitment that companies found to dodge tax would not be awarded public contracts.
McDonnell said the tax burden was currently too heavy on those less able to pay. “In this coming period we will be developing the policies that will shift the tax burden more fairly, away from those who earn wages and salaries and on to those who hold wealth,” he said.
In a section of the speech trailed heavily in advance, McDonnell said a Labour government would be more interventionist in the economy, both in terms of direct investment and protecting industries as needed.
“The winds of globalisation are blowing in a different direction,” he said. “They are blowing against the belief in the free market and in favour of intervention.
“Good business doesn’t need no government. Good business needs good government. And the best governments today, right across the world, recognise that they need to support their economies because the way the world works is changing.”
Interviewed before his conference speech on Sky News, McDonnell said the support would involve a national investment bank borrowing £100bn, which would in turn “lever in” £150bn more in private funding to invest in infrastructure and skills.
Addressing Brexit, McDonnell argued that, while Labour must respect the result of the EU referendum, that “doesn’t mean we have to accept what the Tories serve up for our future relationship with Europe”.
It was vital, he said, to protect jobs. “So we will seek to preserve access to the single market for goods and services,” he said. “Today, access to the single market requires freedom of movement of labour. But we will address the concerns that people have raised in the undercutting of wages and conditions, and the pressure on local public services.”
With Jeremy Corbyn re-elected as leader, Labour had to stop bickering and become “a government-in-waiting”, McDonnell said, making a point of praising the defeated leadership candidate, Owen Smith, for campaigning against cuts to disability benefits.
In a very personal end to his speech, McDonnell recalled his upbringing, and the council home and state education that helped his family.
“Our generation always thought that from here on there would always be a steady improvement in people’s living standards,” he said. “We expected the lives of each generation would improve upon the last. Successive Tory governments put an end to that.
“Under Jeremy’s leadership, I believe that we can restore that optimism, people’s faith in the future. In the birthplace of John Lennon, it falls to us to inspire people to imagine.”
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