John McDonnell is trying to reassure the City that Labour doesn't have a “shadow manifesto”

The shadow chancellor says “there are no tricks up my sleeve”. But business leaders fear the party would be more radical in power than it suggests. 

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When John McDonnell recently greeted a business executive, he quipped: “Hello, are you looking forward to having a Marxist in No 11?” But at Labour’s “Future of Finance” conference at Bloomberg’s new European headquarters, the shadow chancellor had a more reassuring message for the City of London. “There are no tricks up my sleeve,” McDonnell declared in his speech. “What you see is what you get.”

It’s a line McDonnell has used before. “We’ve got nothing up our sleeves,” he told Financial News last month. “There is no [hidden] side to us.” What explains this reassurance mission?

The fear in the City is that Labour has a “shadow manifesto”: a programme far more radical than its 2017 version. As a backbencher, McDonnell supported policies such as the nationalisation of the banking sector, a 60 per cent top tax rate and a wealth tax on the richest 10 per cent. In 2006, he described his “most significant” intellectual influences as Marx, Lenin and Trotsky.

Allen Simpson, the chief operating officer of Labour in the City (a group for supporters in financial services) and Barclays’ director of public policy, recently told me: “There is the question of a ‘shadow manifesto’, is there an alternative manifesto sat behind? I see no evidence of that.” The City has concerns over significant elements of Labour’s programme, most notably the renationalisation of privatised services (water, energy, rail, post) and the proposed rise in taxation to a record peacetime level. But most business leaders recognise this does not amount to a plan for the overthrow of capitalism.

As I’ve written before, Labour’s 2017 manifesto owed more to social democracy than Marxism (indeed, James Meadway, McDonnell’s chief economic adviser, once compared Jeremy Corbyn’s policies to those of the SDP). In many European countries it remains the norm for public utilities to be in public hands. Unlike the socialists of the past, Labour is not proposing to nationalise the “commanding heights” of the economy or the top 200 companies, still less abolish private property.

The party has pledged to raise the top rate of income tax to 50 per cent on earnings over £123,000 (and to reduce the 45p threshold from £150,000 to £80,000 - targeting the top 5 per cent of earners). But this remains below the top rate of 60 per cent which endured for nine years of Margaret Thatcher's reign (1979-88). Corporation tax would rise from 19 per cent to 26 per cent, a rate seen as recently as 2011, and far below France’s 33 per cent and Germany’s 30 per cent. The party has only promised to "consider" a land value tax.

What of Labour's pledge to invest £250bn in infrastructure? The total, as few note, is spread across a decade and would be funded by borrowing at the cheap rates the UK has long failed to take full advantage of. Annual investment would rise from 2 per cent of GDP (£40bn) to 3 per cent (£65bn) - the level achieved before George Osborne's 2010 spending cuts. Such a programme would help redress Britain's historic underspending on infrastructure, stimulate growth, improve productivity and raise living standards. And though they are denounced by opponents as “radical” and “dangerous”, all of the above policies enjoy widespread public support.

McDonnell’s mission is to convince the City that the party will remain within the social democratic mainstream. But in doing so, he faces a tough balancing act. The shadow chancellor must also reassure left-wing allies that he would take full advantage of his office if elected. The private complaint from some Corbyn allies is not that Labour is too radical - but that it is not radical enough.

George Eaton is political editor of the New Statesman.