In his first speech to the party’s conference as shadow chancellor, McDonnell said Labour was now embarking on “the immense task of changing the economic discourse in this country”.
As well as appointing an economic advisory committee to help develop public spending and taxation policies, McDonnell announced that Kerslake would work with the party.
“I want us to stand back and review the major institutions that are charged with managing our economy to check that they are fit for purpose and how they can be made more effective,” he said.
“As a start I have invited Lord Bob Kerslake, former head of the civil service, to bring together a team to review the operation of the Treasury itself.”
McDonnell said Labour needed to “prove to the British people we can run the economy better than the rich elite that runs it now” and show step-by-step that austerity was not an economic necessity but a political choice.
“First we are throwing off that ridiculous charge that we are deficit deniers,” he said.
“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.”
Having cleared this “debris”, McDonnell said he would open up a national discussion on the reality of the roles of deficits, surpluses, long-term investment, debt and monetary policy.
“We are moving on the economic debate in this country from puerile knockabout to an adult conversation,” he added.
“I believe the British people are fed up of being patronised and talked down to by politicians with little more than silly slogans and misleading analogies.”
How to tackle the deficit would be the key dividing line between Labour and Conservative, he said.
“Unlike them, we will not tackle the deficit on the backs of middle and low earners and especially by attacking the poorest in our society. We will dynamically grow our economy. We will strategically invest in the key industries and sectors that will deliver the sustainable long term economic growth this country needs.”
This would also include forcing firms like Starbucks, Vodafone, Amazon and Google to pay their fair share of taxes, he stated.
“They will be cuts to the corporate welfare system. There will be cuts to subsidies paid to companies that take the money and fail to provide the jobs.”
McDonnell highlighted that although austerity was “just a word almost meaningless to many people”, many others were affected by cuts in services.
“Austerity is also not just a word for the 100,000 children in homeless families who tonight will be going to bed not in a home of their own but in a bed and breakfast or temporary accommodation.
“On behalf of this party I give those children my solemn promise that when we return to government we will build you all a decent and secure home in which to live.
“Austerity is not just a word for the women and families across the country being hit hardest by cuts to public services. Women still face an average 19.1% pay gap at work. Labour will tackle the pay gap, oppose the cuts to our public services and end discrimination in our society.”
