Shadow chancellor John McDonnell has vowed to “rewrite the rules” on taxes, investment and how economic institutions work as he urged the Labour party to “become a government-in-waiting”, while promising to introduce a £10 Living Wage
In order to do that, he said, the party has to put an emphasis on policy and “plans for their detailed implementation”.
McDonnell offered his support to the financial services community, and said Labour would support access to European markets for financial services, but re-stated his emphasis on reforming the sector.
“We will support financial services where they deliver a clear benefit to the whole community – not just enriching a lucky few,” he said.
He echoed the arguments of Labour economic advisor Joseph Stiglitz, and said, “We will rewrite the rules to the benefit of working people on taxes, investment, and how our economic institutions work.
“So on tax, we know we can’t run the best public services in the world on a flagging economy with a tax system that does not tax fairly or effectively.”
Labour has already launched its own Tax Transparency and Enforcement Programme, which it said will force the government into action on tax avoidance and evasion.
He said a Labour government would create a new Tax Enforcement Unit at HMRC, doubling the number of staff investigating tax avoidance, and said it would ban “tax-dodging” companies from being granted public sector contracts.
He also addressed HMRC’s chronic resource problem, and said that as a government, Labour would “make sure” the Revenue had the “staffing, the resources and the legal powers to close down the tax avoidance industry that has grown up in this country”.
McDonnell pledged support for infrastructure development, including delivering HS3 to the north of England, superfast broadband and low-carbon electricity.
Labour’s plans for a £250bn National Investment Bank will be the financial backing for the developments, “backed up” by a network of regional development banks, “with a clear public mandate to supply finance to regional and local economies”.
This emphasis on entrepreneurship and productivity growth was welcomed by the CBI, which said, “Firms will back the commitment made to a manufacturing renaissance, supported by investment in infrastructure, skills, innovation and exports, taking advantage of historically low interest rates.
“But this must be fiscally responsible and based on balancing the books over the economic cycle. We look forward to seeing the detail.”
However, it was McDonnell’s decision to name-and-shame “headline-grabbing” bad behaviour like that of Mike Ashley, Philip Green, and the implication of “some of the largest firms in the City of London”, including HSBC, in the Panama papers that raised most eyebrows at the CBI.
The business group said ,“The headlines created by a few irresponsible companies do not apply to the vast majority, which are focused on seizing investment opportunities to grow, creating new jobs, and supporting skills development.
“Business contributes £185 billion in taxes to the exchequer, 29% of the total tax take, which helps pay for vital public services, like hospitals and schools.
McDonnell also promised support to small business for implementing a new higher wage to accommodate the rising cost of business, and said Labour would publish proposals which would examine a number of areas, including the expansion of the employment allowance, which would make sure the increased wages would not impact on hours or employment.
“The best way to increase pay and living standards across the UK is to support firms to improve productivity. We already have an expert independent Low Pay Commission, which should have responsibility for setting statutory wages levels,” the CBI said.
Labour MP Steve McCabe also said this week that tax relief is currently targeting the “wrong sector of the population”, saying that young pension savers should be supported by a tax boost.
Elsewhere, Tom Watson announced an independent committee to target the “dark side” of the UK’s gig economy, looking into the impact of changes to the nature of work caused by the “fourth industrial revolution”, brought on by the rise of “robots and automated technologies”.