John McDonnell: My 'new economics' will redistribute wealth

Shadow chancellor John McDonnell is to set out plans for a "new economics" to redistribute wealth which will shift the burden of taxation away from low and middle earners.

Conservatives accused Mr McDonnell of planning "damaging tax rises on jobs, investment and earnings", after he said his plans would ensure the economy "serves everybody, not just the rich few".

A Labour government would force corporate "tax dodgers" to pay their share and there would be "more wealth fairness and less welfare cuts", he said.

Mr McDonnell's first keynote speech since being appointed shadow chancellor comes as leader Jeremy Corbyn seeks to regain the initiative after activists denied him a vote at Labour's annual conference in Brighton on whether to keep the Trident nuclear deterrent.

Mr Corbyn wants to scrap the missiles, but unions Unite and the GMB insist they should be kept and delegates decided on Sunday that the subject should not even be debated in the four-day conference.

Meanwhile, The Times reported that a Unite official had proposed "stuffing" constituencies of centrist MPs who refused to serve under Mr Corbyn with supporters, in an apparent bid to force out moderates.

In a leaked email obtained by the paper, executive council member Tony Woodhouse reportedly said the union should "do a massive recruiting drive in the CLPs (constituency Labour parties) where MPs have said they wouldn't serve in his shadow cabinet".

But a Unite spokeswoman said: "As we have made consistently and regularly clear, Unite does not and will not support any moves to target MPs."

Writing in the Daily Mirror, Mr McDonnell said he wanted to launch a "national debate" about the future of the economy.

"The way things have happened till now can't continue," he said. "And we as a country need to decide if we think it's right for the poverty and inequality that exist to continue - or will we find a new fairer path."

He said: "As shadow chancellor, I make this solemn pledge: If elected in 2020, we will grow an economy which serves everybody, not just the rich few.

"And we will pay for it not on the backs of the poor and the most vulnerable but from a fairer taxation system which lifts the burden away from middle and low-income earners and from collecting the tax lost every year to corporate tax dodgers.

"The new economy under the next Labour government will be one in which we see more wealth fairness and less welfare cuts.

"A new and fairer world is possible and together we can and will achieve it."

Aides said he would also unveil a "radical" review of the functioning of financial institutions including the Bank of England, though they said there was no question of stripping the bank of its independence.

During his campaign for the Labour leadership, Mr Corbyn advocated a "people's quantitative easing" plan under which the bank would be given a new mandate to invest in housing, energy, transport and digital projects.

A Conservative spokesman said Mr McDonnell's plans would mean tax rises on jobs, investment and earnings.

"And as (Bank of England governor) Mark Carney has said, Labour's policy to end the Bank of England's independence and print money would drive up the cost of living," the spokesman said.

"That's why Labour are a serious threat to our economic security and the security of all working people."

Speaking at a fringe event on Sunday night, Mr McDonnell said Labour would consider backing a "Robin Hood" tax on bank transactions to raise billions of pounds for public services.

And he also promised "a mass house-building programme" and a system of rent controls to ensure the availability of affordable homes.

The shadow chancellor's aides said his speech to the Brighton conference will not set out firm policies to be adopted by Labour, but indicate the direction in which the new leadership team under Mr Corbyn plans to take the party.

He will set out four principles underpinning his approach:

:: A Labour government would tackle the deficit by "living within its means", but would also invest to grow the economy, and share the proceeds of that growth more equally among different classes, regions and nations;

:: A "radical" review will examine the role of a number of national institutions in building a stable economy;

:: Labour will launch a national debate on a "real economic alternative" to the current arrangements;

:: The party will bring together wealth creators, workers, businesses and civil society to promote a "long-term sustainable economy".

On Sunday, Mr Corbyn used a TV appearance to hint at the possibility of an income tax cut for low earners while calling for firms to pay what they owe rather than hide profits in tax havens.

He also restated plans to raise the top rate of income tax from 45% to 50%.

McDonnell aides said Labour would not necessarily adopt all the economic proposals set out by the Corbyn team during the leadership campaign, but said the ideas will "influence" the national debate in a series of meetings around the country.

Meanwhile a new economic advisory panel including Nobel laureate Joseph Stiglitz and best-selling economist Thomas Piketty will meet on a quarterly basis to develop ideas for Labour.