BBC News

Labour's John McDonnell demands 'emergency Budget'

Related Topics
  • Budget 2017
image copyrightReuters

Shadow chancellor John McDonnell has demanded "an emergency Budget for our public services", which he says are in crisis.

He is promising to spend about £17bn a year extra on the NHS, social care, schools and local government.

The extra spending would be paid for by tax rises for companies and "the rich", while tackling tax avoidance.

The government said Labour's plans would lead to more debt, higher taxes and fewer jobs.

Chancellor Philip Hammond is due to give his Budget speech next Wednesday afternoon.

  • What to watch for in next week's Budget
  • Borrowing boost for social housing

'Growing anger'

In a speech at Church House in Westminster, Mr McDonnell called for an end to austerity by the government and set out five main proposals:

  • Pause the roll-out of Universal Credit to fix delays in benefits payments
  • Fund public sector pay rises
  • Put more money into infrastructure such as road and rail projects
  • Increase funding for health, education, and local government
  • Launch a large-scale house-building programme.

He said the Chancellor, Philip Hammond, was out of touch with the lives of ordinary people and there was growing anger after seven years of austerity.

"They were told austerity was the solution to the economic crisis," he said.

"So it's understandable that after seven years of the austerity solution, they are angry when they queue for hours at A&E, see their school laying off teaching assistants, their Surestart centre closing and the local neighbourhood police withdrawn from their streets.

"Especially, while at the same time, they learn about the Paradise Papers and the tax avoidance of the super-rich."

Mr McDonnell said the Conservatives were giving away about £76bn in cuts to corporation tax, capital gains tax and "the rich" during the life of this Parliament.

He said Labour had already calculated £6.5bn could be raised from clamping down on tax avoidance, but he believed that could be significantly higher after the leaking of the Paradise Papers.

A global investigation looked at 13.4 million previously secret documents that revealed offshore investments made by companies, politicians and wealthy individuals.

Analysis: Kamal Ahmed, BBC economics editor

John McDonnell wants to create a clear red line between him and the present incumbent of Number 11, Philip Hammond.

A week ahead of the Budget, the shadow chancellor has said that more should be spent on health, education and housing and that the public sector pay cap of 1% should be lifted.

The controversial introduction of the new benefits system - the universal credit - should also be delayed after evidence that some recipients were being left without payments for several weeks.

To pay for the new policies, Mr McDonnell will say he is willing to borrow more to invest in infrastructure, arguing it is a good time to do so as interest rates are at historic lows.

It is a position rejected by the Conservatives, with Mr Hammond saying that more borrowing now simply means more debts to be repaid in the future.

It is expected that he will focus any new spending on health and housing in the Budget, next Wednesday.

'Accountancy tricks'

Mr McDonnell said more action was needed to tackle what he called the "housing crisis".

The government is to wipe about £70bn worth of debt from housing associations' balance sheets, allowing them to raise money more cheaply.

But Mr McDonnell described it as "accountancy tricks" and called for more funding.

"The scale of the crisis demands action on an equal scale. We need at least 100,000 new social homes a-year funded and built by this government, to even begin to address the problem."

He said Mr Hammond could do far more.

"He wants to pretend he cannot invest on the scale needed, yet he has already borrowed more in his first year as chancellor than any of his predecessors in their first year at the Treasury."

Responding to Mr McDonnell's proposals, Chief Secretary to the Treasury Liz Truss said: "The shadow chancellor has today admitted Labour would borrow billions more and hike up taxes to record levels.

"The costs would rack up and up - putting economic growth at risk and hitting ordinary working people in the pocket.

"Only the Conservatives can build a country that is fit for the future."

Related Topics

More on this story

  • Paradise Papers: Government urged to tackle tax avoidance in Budget

  • McDonnell: Overseas territories tax transparency needed