Labour will launch an "aggressive" drive to ensure that multinational corporations such as Starbucks, Vodafone, Amazon and Google pay "their fair share of taxes" as part of a bid to balance the nation's books fairly, shadow chancellor has said.
And he set the scene for tax rises on the rich, by saying that when a Labour government needs to raise money it will do so by "fairer, more progressive taxation" which does not impose a burden on middle and low-earners.
In his first major speech as shadow chancellor, he accused Conservatives of trying to make middle-earners and the poor bear the burden of eliminating Britain's deficit, while protecting the richest from the consequences of the economic crisis.
Mr McDonnell told Labour's annual conference in Brighton that the party would not be "deficit deniers". But rather than following the Conservative route of austerity, Labour will balance the books by targeting corporate tax avoidance and subsidies for companies and by stimulating economic growth.
"Austerity is not an economic necessity, it's a political choice," he said.
We will tackle the deficit
Mr McDonnell said: "I tell you straight from here on in Labour will always ensure that this country lives within its means. We will tackle the deficit.
"But this is the dividing line between Labour and Conservative. Unlike them, we will not tackle the deficit on the backs of middle and low-earners and especially by attacking the poorest in our society.
"We will tackle the deficit fairly and we can do it."Pay their fair share of taxes
Mr McDonnell said Labour's strategy would be based on growing the economy by strategically investing in key industries and sectors.
And he said, to loud applause: "Labour's plan to balance the books will be aggressive.
"We will force people like Starbucks, Vodafone, Amazon and Google and all the others to pay their fair share of taxes.
"There will be cuts to tackle the deficit but our cuts will not be the number of police officers on our streets or nurses in our hospitals or teachers in our classrooms.
"They will be cuts to the corporate welfare system. There will be cuts to subsidies paid to companies that take the money and fail to provide the jobs.
"Cuts to the use of taxpayers' money subsidising poverty-paying bosses.
"Cuts to £13 billion tax breaks given to buy-to-let landlords for repairing their properties, whether they undertake the repairs or not.
"And cuts to the housing benefit bill when we build the homes we need and control exorbitant rents."