John McDonnell is late, but he says he has a good excuse. He’s been on a picket line with PCS union members and campaigners demanding the Ministry of Justice pays its cleaners a London Living Wage. “Sorry,” he says. “I didn’t realise there was going to be a march from MoJ to BEIS [the Department for Business] as well.”
Protesting outside Whitehall departments is not the sort of thing shadow chancellors have done over the years (though he says “I can remember being on the Grunwick picket line next to Shirley Williams in the 80s”). But as both his admirers and critics will point out, McDonnell is not your typical shadow chancellor.
Jeremy Corbyn’s closest long-time ally and now most loyal lieutenant in the shadow cabinet, the 66-year-old leftwing firebrand has been spending months meeting City types and others as he builds on the last Labour manifesto to plot even more radical policy changes for the next election.
Sitting in his Commons office, he is delighted that the Institute for Public Policy Research (IPPR) has just released its final ‘economic justice’ report, complete with a string of proposals to end the short-term profits culture of Britain and the zero-hours, low-wage business model of many firms.
“It’s huge, it’s massive. The analysis keys in with everything we’ve been saying about injustice, inequality, short-termism. If you look at it as a package, what it says about trade unions and a real living wage, redistribution. It’s the sort of stuff that we’d want to take into government with us.”
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McDonnell compares the IPPR report – backed by figures from the Archbishop of Canterbury to fund manager Helena Morrissey – to the Beveridge Report, which prompted the 1945 Labour government to set up the NHS and welfare state.
“It’s not hyberbole. The Beveridge argument changed the weather in terms of the debate, I think this will change the economic debate. With [Archbishop] Welby and the others, if you look at that Commission you couldn’t get a much broader range.”
Among the main recommendations was a proposal to replace inheritance tax with a £9bn-a-year “lifetime gifts” tax. What does McDonnell think specifically about that, given Labour in previous years has tried to outflank the Conservatives on the issue?
“I think it’s really creative. If you could spread the load during a lifetime rather than that big hit at the end, it would be worthwhile. People would feel it was much more equitable,” he replies.
“On all these policies they’ve got to be tested almost to destruction. That way we can be confident. A lot of this stuff I’d like to take into government.
“I want to test it out on what individual families think about it. I don’t know if the IPPR have done any polling on it, but that’s the sort of thing you’d discuss in a focus group.
“What we are getting from our focus groups is people’s feeling of insecurity that the fabric of society that we took for granted is almost falling apart. It’s not a hopelessness yet but it’s almost on the edge of that. They are looking around for solutions.
“This would give them a commitment about security for their kids for the future. In addition to that it looks fair to me. I think it’s a great idea.”
McDonnell says that as popular as Labour’s 2017 manifesto was, the next one has to reflect the changing mood since even then.
“I thought it was quite tame,” he says. “It was a radical manifesto for the times we were in. Anti-austerity, laying down the foundations of the society we want. That will be the foundation for the next manifesto, the debate we are having now is whether we build on some of these issues.
“When we were drafting the manifesto, a number of people worried it was going over the top. I said ‘no I think it actually suits the climate that we are in’, the way in which people had endured austerity for so long and they are looking for radical solutions. I think we caught the wind then, quite well.
“What the IPPR have done has done exactly the same thing, but progressed on 12 months and I think people are more open to fresh ideas. There’s a languor about eight years of austerity and we are still not seeing the light at the end of the tunnel.
“It isn’t about theoretical debates for most people, it’s about ‘I can’t get a carer for my elderly parent, I’m still waiting in A&E, why are they laying off teaching assistants?’ It’s not so much anger as anguish about what is going on here.”
Yet with Brexit looming, many in and around the Labour leadership are grappling with the possibility of its impact on a Corbyn government. Should there be a snap election and a Labour victory, McDonnell in particular would have to deal directly with the economic impacts.
“It just puts more pressure on us to get the radical solutions in place,” he says. “The Brexit problems that we are going to inherit from the Tories means that the radical solutions become much more important. The one complements the other.”
But if there’s a no-deal scenario, Chancellor Philip Hammond has said the Treasury estimates the hit to growth and revenues would mean the UK could be forced to borrow an extra £80bn a year by 2033.
While stressing no deal would be the worst outcome, McDonnell is surprisingly sanguine about how a Labour-run Treasury would respond. “£80bn yeah, that’s £80bn over a period of time. My view is from what we’ve seen so far we would manage it and manage it effectively,” he says.
“We would have a new relationship with Europe anyway. We’ve met Barnier and I think they are up for a proper working relationship.
“As we go through, I think we should have a general election and the country can choose the team who goes to do the negotiations.
“If the talks do fall apart, we go to the next election with a costed manifesto as before and we take into account the costs of Brexit as well. It creates a sense of urgency for our policies to be implemented more speedily.”
His emphasis on a general election is understandable. After spending nearly all his political life in the wilderness under New Labour, McDonnell is itching to get into power.
But does he agree with those who say a second referendum would help Labour by avoiding a cliff-edge Brexit and allowing a Corbyn government to focus all its energy on radical domestic reform?
“I think it’s a tough option. I’m not going to let the government off the hook on a general election, I’m not going to give them a way out. Then in a general election you have a wider debate, a proper debate about policies, but you do choose the team as well.
“My concern about a second vote is we don’t want to open up the space for UKIP again, we don’t want to open up the space for the Right again. That’s my big concern. If you look at all the recent polls, people on Brexit are split exactly down the middle again. UKIP are even further to the Right than last time.
“Remember my community is not far away from the Polish centre that was attacked. That’s why I’d rather not let them off the hook and I’ll do everything I possibly can to say they either stand aside or give us an election.”
With an estimated 90 percent of Labour party members having voted Remain and many local parties tabling motions for a ‘People’s Vote’ for this month’s party conference, there is pressure to adopt a more formal view.
“That’s why we keep the option [of a referendum] on the table,” he says. “We are never averse to a democratic engagement but I’d rather have a general election so we will keep the option on the table and judge it then. As Keir [Starmer] has said, we will see whatever deal she comes back with.”
But McDonnell sounds much more sceptical about the idea than many Labour MPs. “My constituency voted Leave, I was absolutely amazed. There have been some opinion polls saying it’s shifted. At the moment, testing the ground in my constituency I’m not getting that feel. It’s anecdotal.
“So my biggest fear is you have another referendum, country split down the middle all over again, the Right has a chance to rise again and then we are left with more rancour.”
Anti-Brexit campaigners may be heartened to hear McDonnell has had a meeting with Roland Rudd, the man who has helped fund and set up many of the lobby groups backing a People’s Vote. Rudd, a close ally of Peter Mandelson, is also brother of former Home Secretary Amber Rudd.
But McDonnell is keen to point out they met privately – and didn’t agree some secret new compact on fighting Brexit. “He’s chair of governors at Millfield [the private school]. My brother in law, who is Kenyan, sends his children to Millfield – against all my advice.” As a result, Rudd asked McDonnell for a chat at a family event. “He was saying I’ve looked at your policy in terms of private schools and VAT…and I told him it’s going to happen.
“We didn’t really discuss Europe but I’m sure the next time we will!” he says. “I wanted to talk about Hastings [Amber Rudd’s very tight marginal seat] and the vulnerabilities [of losing to Labour].”
One area where McDonnell worries a hard Brexit would cause real damage is on the environment.
Former Tory leader Iain Duncan Smith said this summer that quitting the EU would allow the UK to dump the ‘carbon floor price’, a carbon tax introduced in 2013 that has seen coal power plummet and boosted non-fossil fuel energy generation.
“They want to deregulate completely and get the free market at the most extreme level of it. Then they smashed the photovoltaic industry, bloody stupid….What we are trying to do is a planned approach over a number of Parliaments,” he says.
McDonnell says Labour’s national investment bank and its infrastructure fund plans will be allied with an approach to taxes that is guided by the need to tackle climate change. Many environmentalists want the carbon floor price, which has been frozen to 2020 by the Tories, to rise further, but the Shadow Chancellor says that all such taxes are under review by Labour.
“I’ve appointed Clive Lewis into the Treasury team to lead on environmental issues and climate change, to put it deep into the work of the Treasury. They are linking up with the leaders’ office and Becky Long Bailey in BEIS.
“He’s looking at, reviewing tax changes. He’s leading on driving the ethos into the Treasury and how we can change economic policy and tax policy as well, there will stuff at conference on that.”
But McDonnell signals that renewables projects would get a boost under Labour. “It will be one of the missions of the industrial strategy. Stevie Rotheram [the Labour metro mayor] in Liverpool, he wants to develop the barrage across the Mersey. Projects like that will be replicated round the country. I thought it was good and it’s relatively cheap as well.”
Another area for long-overdue radicalism is on City regulation. Ten years after the financial crisis, Labour is looking at how to answer public demands for greater sanctions against those who cause the chaos.
Would more errant bankers go to jail under Labour? “Seriously I think we need to hold them to account more effectively. I said during the crash itself, it’s interesting how many bankers actually went to jail? One or two at best and they were always the juniors who got it in the neck.
“In the City itself, there’s a real mixture, people I meet who are chastened by what happened learned the lessons and try to look at sound finance and these are people we want to work with.
“But you still come across people who are into a fast buck, and devil take the hindmost and that’s unacceptable. [We’ve got] self regulation, which is bizarre in some areas. We need to ensure there’s a proper regulation system but there are appropriate sanctions as well.”
The radicalism will continue later this year, probably November, when the party publishes its findings on a ‘Universal Basic Income’, the idea of handing every citizen state cash to provide a basic protection from poverty. McDonnell says the debate is also about ‘universal basic services’. “We will lead into the new year with a proper debate,” he says.
The Shadow Chancellor will be hoping the focus can be more on Labour’s policy offers, not least as Corbyn has been dogged all summer by the damaging row over anti-Semitism.
The ruling NEC agreed this week to adopt in full the IHRA guidelines on the issue, but Jewish groups are still very bruised by the whole process. McDonnell famously apologised live on camera – ‘from the bottom of my heart’ – for his own past remarks about the IRA. Should Corbyn make a personal apology in his party conference speech in Liverpool?
“Remember Jeremy has apologised,” he replies. “I can’t see the point of repeating it because he’s already done it. I think now is looking forward. He was very honest, he apologised and then he moved on.
“Adopting the IHRA, adopting the examples, giving a commitment to others who are anxious about freedom of speech, that then gives us the firm foundation upon which we can move on.
“There will be disagreements about the application of the code of conduct I’m sure but the idea is you establish the structures to enable those discussions take place. That’s what I want to see.
“The idea is there will be a consultation and a proper discussion. I’m looking for something positive to come out of all of this. We’ve seen what needs to be done and we’ve done it, now we go to the next stage.
“The positive element is listening to all the different views, and that includes the range of views in the Jewish community and there is a huge range within the Jewish community. But then also as soon as you get into the issue around the Middle East then you have to listen to a range of views as well. And that’s what Jeremy was trying to do yesterday, to try and balance that all.
“I’m hoping we can have a much more reasonable debate and rational debate about what’s happening in the Middle East.”
Asked if the party should formally adopt Corbyn’s longer statement made to the NEC to underline free speech protections, McDonnell says: “I read Kenneth Stern, who wrote the IHRA, his submission to Congress and it’s brilliant.
“We should get him over. He actually said very clearly this definition and examples should not be used in any way to impinge the right of people to express their views. I thought what Jeremy said was a reflection of that tradition and that’s the way we should go. He found that his own words were being used to stifle debate around Israel, Palestine etc within academic circles in America.”
Labour’s other big item on its internal agenda at conference will be its Democracy Review, which includes rule changes on everything from the leadership election to NEC seats.
Momentum has this week called for more ‘open’ selections for Westminster seats, a move seen warily by many Labour MPs. But McDonnell is not convinced of the need for change,.
“I’m happy with the trigger ballot as it now stands. Let the debate happen, I want to hear people’s views but the trigger works really now.
“We will see what comes out. I can’t judge which way the mood would go at conference on that. I think a lot of people are looking for stability now and moving forward and bringing people together.
“It’s not hard to keep your constituency party happy, if you do the work listen to people’s views. It’s like my relationship with my constituents, ‘I might disagree with you on that but actually he does the work, he’s there when I need him’. So when you get a big rift there’s something fundamentally wrong in terms of the relationship but that’s very rare.”
There is, however, one Democracy Review reform that McDonnell is supporting. Activists want to give members the power to directly elect their local council group leaders. The idea is to be piloted, but Labour local government chiefs say it will prove unworkable, costly and even unlawful.
McDonnell says: “I agree with it. What was put to me was that we elect the leader of the party, the leaders in Wales and Scotland by OMOV [one member, one vote], why don’t we do it at a local level. And I couldn’t think of an argument against it.
“The issue is this we have got over half a million members, we are now a social movement a mass movement, we’ve got to come to terms with being a mass movement and part of that is members want a role to play.
“And that’s why the Democracy Review matters, how do we make policy, how do we elect people, how do we engage with party members? And this is part of it. It’s a novel idea, but when it was put to me I couldn’t think of an argument against it.”