Labour can show that “another world is possible” by rejecting austerity while also “living within our means”, Shadow Chancellor John McDonnell has said.
He told activists that his goal was to change the “economic discourse” in the country and secure “dynamic growth”.
A Labour government would reverse cuts to tax credits and ensure firms paid their “fair share of taxes”.
He also called on Labour MPs who had refused to serve under new leader Jeremy Corbyn “to come back”.
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In his first speech as shadow chancellor, he set out priorities in key areas
- Tackling tax avoidance and getting big companies to pay “their fair share of taxes”
- Introducing a “real living wage”
- Cutting tax breaks for buy to let landlords in a clampdown on “corporate welfare”
- Asking ex-civil servant Lord Kerslake to review the operations of the Treasury
- Reviewing the Bank of England’s inflation mandate and the work of Revenue and Customs
Mr McDonnell rejected Conservative claims that Labour were “deficit deniers”, attacking George Osborne’s record and insisting that a future Labour government would secure prosperity through increased investment.
He attacked the “current model” of economic policymaking, saying the Conservatives only “represented the 1% of the richest” in society and said he was “fearful” for the existing economic recovery that he said was based on insecure, unsustainable foundations.
“We are embarking on the immense task of changing the economic discourse in this country,” he said.
“Step by step: First we are throwing off that ridiculous charge that we are deficit deniers. Second we are saying tackling the deficit is important but we are rejecting austerity as the means to do it.
“Third we are setting out an alternative based upon dynamically growing our economy, ending the tax cuts for the rich and addressing the scourge of tax evasion and avoidance.”
Analysis by political correspondent Iain Watson
The new shadow chancellor is certainly managing expectations, warning Labour delegates that his speech this morning could be “stultifyingly boring”.
As a backbencher, John McDonnell rebelled more than any other MP against his own party but now he says it’s time to stop ranting and start discussing. So don’t expect many firm commitments – more a direction of travel
He’ll use language usually associated with David Cameron rather than Labour’s left – for example he’ll announce he’d share the proceeds of growth but while the rhetoric may be reassuring, the policy options will be radical.
Cutting the deficit without also cutting spending would require, he says, clamping down on tax dodgers. But it would also involve raising taxes and he is open to discussing whether to impose a levy on financial transactions – what supporters call a robin hood tax.
The Conservatives argue that this would lead to the loss of jobs and investment.
But the dividing lines are also with Labour’s recent past. There is to be radical review of institutions such as the Bank of England which was given its independence by Gordon Brown. In future it may be given a key role in creating funds to invest in infrastructure and have a much broader remit than meeting an inflation target.
John McDonnell says a new politics requires a new economics – if not entirely new, his ideas certainly haven’t been on the agenda of a major party for years.
Labour faced an “immense task” ahead, he conceded, but said “as socialists we will display our competence with our compassion”.
“Idealists yes, but ours is a pragmatic idealism to get things done, to transform our society. We remain inspired by the belief and hope that another world is possible. This is our opportunity to prove it. Let’s seize it.”
In the speech, he said he would launch a consultation on a fresh mandate for the Bank of England while insisting it would retain its independence – granted by Labour in 1997 – and its ability to set interest rates without political interference.
At the moment, the Bank of England’s mandate is to deliver price stability, focusing on delivering inflation of 2%. Governor Mark Carney must write to the government every time the target is missed by 1% on either side. However, inflation is currently close to 0% and has not been within the target band since October 2014.
“They will retain their independence in the same way they had under Gordon Brown and George Osborne,” he told Radio 4′s Today.
But he added: “I don’t want to be critical of Mr Carney but they are not meeting their mandate.
“It has been 18 years since we reviewed it (the mandate). There will be a parliamentary debate and we want to include in that other aspects of consideration – so for instance prosperity in the economy and long-term investment in the infrastructure.”
In Monday’s speech, he “demanded” access to the financial models used by the Office for Budget Responsibility and the Bank of England to help Labour formulate an alternative economic policy, saying it “should be open to all parties in Parliament” to test their own ideas “in advance of getting into government”.
He also announced a review of Her Majesty’s Revenue and Customs to find out how it could beef up its efforts to collect the billions of pounds avoided by UK companies and individuals every year.
During his Labour leadership campaign, Jeremy Corbyn claimed £120bn could be recovered from tax avoidance and evasion – enough to eliminate the UK’s budget deficit without cutting welfare or public spending – although others in the party have questioned this.
Speaking shortly before Mr McDonnell, Unite leader Len McCluskey said “defeatists in Labour’s ranks” could not be allowed to “debilitate” the shadow chancellor and Mr Corbyn.
But the Conservatives said Labour’s plans would “drive up the cost of living” while CBI boss John Cridland said the economy was seeing a pick-up in business investment and productivity and the “best way to help that forward is to get behind businesses and the financial institutions that fund these businesses”.