POLITICS
27/09/2015 20:34 BST | Updated 28/09/2015 06:59 BST

Jeremy Corbyn's Anti-Austerity Adviser 'Unhappy' With Labour 'Balancing The Books' As 'Robin Hood Tax' Floated By John McDonnell Ahead Of First Shadow Chancellor Speech

John McDonnell, MP for Hayes and Harlington, talks to the media outside the Houses of Parliament, London, following his suspension from the Commons for five days after he picked up the mace during heated exchanges on the Government's decision to go ahead with a third runway at Heathrow.
Johnny Green/PA Archive
John McDonnell, MP for Hayes and Harlington, talks to the media outside the Houses of Parliament, London, following his suspension from the Commons for five days after he picked up the mace during heated exchanges on the Government's decision to go ahead with a third runway at Heathrow.

One of Jeremy Corbyn's anti-austerity economic advisers has warned the new Labour leadership against aping the Tories, suggesting there is already signs of compromise.

Ann Pettifor praised Mr Corbyn for moving away from the "fetish with the deficit", but suggested some brought in to guide the party were "unhappy" with talk of "balancing the books".

Ms Pettifor, of Policy Research in Macroeconomics (Prime), is among six economists helping Shadow Chancellor John McDonnell write economic policy.

The group, which will meet four times a year and give lectures in Westminster, include Thomas Piketty, 'rock star' economist and author, Joseph Stiglitz, the Nobel prizewinner, and Anastasia Nesvetailova, a professor at City University.

Mr McDonnell will say today a 'Robin Hood tax' on the City of London could become official Labour policy under Mr Corbyn in his party conference speech.

Ms Pettifor, speaking to Radio 4's Today programme, said it was "refreshing" to move "away from the fetish with the deficit and towards more constructive ideas for preparing Britain for the future".

But she added: "It's not that we all agree with the leader. In fact we don't agree with all aspects of what, for example, the Shadow Chancellor has argued.

"Some of us have been unhappy with the way the debate has been framed so far in terms of balancing the books and living within our means when we know perfectly well no Chancellor or Shadow Chancellor can cut the deficit.

"They can cut government spending but when tax receipts fall they can't cut the deficit."

Mr McDonnell has in recent days said Labour would match Mr Osborne's spending plans, although tackling the deficit would be reached by spending to boost the economy.

Also on Radio 4 Today later, Mr McDonnell hinted that printing money to create jobs - or "People's QE", which he and Mr Corbyn support - would only happen at the "right time in the economic cycle", signalling a softening of a key message in the Corbyn leadership campaign.

He also had a dig at Bank of England governor Mark Carney, saying he needed to "have a chat" over his suggestion "People's QE" would cause inflation.

The 'Robin Hood' levy - on every financial transaction traded on the stock market and foreign exchanges - is set to be included in a party review and a central plank of the 'new economics' unveiled by Mr McDonnell in his conference speech in Brighton.

The so-called Financial Transaction Tax (FTT) has long been proposed by campaigners as a way of channelling a fraction of the huge sums traded every day across the globe and using it for the NHS and other key public services.

But although an online petition for the Robin Hood Tax campaign has more than a million signatures, it has met stubborn opposition from George Osborne and business and until now the Labour Party has ruled out the idea.

Mr McDonnell is expected to confirm the plan as he launches 'a radical review of the national institutions that manage our economy', including both the Treasury and the Bank of England, and demands for access to Office for Budget Responsibility modelling.

Ahead of his first speech in his new role, he told a fringe meeting on Sunday night that he and new Shadow Business Secretary Angela Eagle had agreed an FTT could be part of a review.

Mr McDonnell said the "position is straightforward: either we introduce a financial transaction tax unilaterally in this country, or Europe or globally".

He has spent years campaigning for a Financial Transaction Tax and revealed that he had a furious row with his predecessor Ed Balls when he tried to secure a Commons debate on the issue.

At the same Unite fringe meeting, David Hillman of the Robin Hood Tax campaign, said there was nothing "dangerous or radical" about the idea, which he said had wide support across Europe.

The point of the tax would be "to have the banks and hedge funds pay for, or at least contribute to paying for, the immense economic damage their gambling, essentially it was gambling, had caused," he said.

He told the fringe that his speech on Monday "won't be one of my normal rants" and "might be stultifyingly boring" because he would be setting out a series of "economic initiatives" Labour had planned on things like 'living within our means'.

Mr McDonnell will also use his speech to call for a review of the Treasury and HM Customs and Revenue's fiscal policy and revenue collection. The HMRC review will look at how "we maximise our tax take and at the same time it is done on a fair and just basis”, he told the fringe meeting.

Corporate tax evasion will be targeted and specific firms linked to tax evasion are expected to be named.

The Shadow Chancellor is expected to call for the Bank of England's mandate to be broadened so that it has a wider brief to achieve economic growth, as opposed to keeping inflation under 2% a year.

But aides stressed he is not seeking to interfere with the Bank’s independence.

Mr Corbyn told the BBC’s Andrew Marr Show that he would like to deliver a tax cut for those paying the lowest rate of income tax.