Shadow chancellor John McDonnell systematically misled the public and colleagues about the financial affairs of the country’s biggest council, for which he was once responsible, and then ordered civil servants to destroy evidence revealing the truth, it is claimed in secret papers obtained by the Mail.

Internal documents from the now-defunct Greater London Council (GLC), never previously published, lay bare the full extent of McDonnell’s behaviour.

The confidential papers include statements by a senior civil servant, a fellow Labour councillor and former GLC leader Ken Livingstone setting out in detail how his then deputy McDonnell misled the public over the council budget, then the largest in Western Europe.

Significantly, when asked on his first morning as Shadow Chancellor about his suitability for the job, he said he was ‘chancellor of the exchequer for London at the age of 29’. It was a hollow boast, bearing in mind he was sacked by Livingstone

McDonnell himself has compared his GLC role in the early Eighties to that of UK chancellor — and the Mail’s dossier provides disturbing evidence of his approach to taxpayer funds.

Most worryingly it poses very serious questions about how he might behave if he ever were in charge of the nation’s finances should a Corbyn Labour be elected to power.

In the documents, both Livingstone and senior GLC civil servant Reg Race directly accuse McDonnell of ordering that papers which set out the council’s true financial position be ‘shredded’.

Livingstone, pictured with McDonnell left, said McDonnell repeatedly assured him that the claim of £140 million in cuts was accurate — only to discover the truth a week before the GLC was due to vote on its budget

A former GLC official, who witnessed many of the events detailed in the confidential reports, told the Mail: ‘This man must never be allowed in charge of public finances.’

At the time — between 1984 and 1985 — McDonnell was a labour councillor in the capital campaigning to defy the Thatcher Government’s plans to limit local authority spending and he was threatening to ‘go illegal’ by refusing to set a budget.

In a note to Ken Livingstone in October 1984, shortly after he was appointed deputy leader, McDonnell stated: ‘The whole point of our administration is that we are a challenge to the centralist capitalist state.’

The lifelong class warrior, who has put as ‘fermenting [sic] the overthrow of capitalism’ as his hobby for his Who’s Who entry, is still on the same mission more than 30 years later.

Peppered in his speeches today are references to ‘Tory cuts’. One of his favourite soundbites is: ‘Austerity is not an economic necessity, it’s a political choice.’

Back in the Eighties, he described the so-called ‘rate-cap rebellion’ by the GLC and other mainly Left-wing councils against the Tory government as an opportunity to open a ‘second front’ alongside the miners’ strike to bring down Thatcher.

As part of the campaign, McDonnell repeatedly claimed the Tory proposals would mean £140 million worth of cuts and huge job losses in London.

The lifelong class warrior, who has put as ‘fermenting [sic] the overthrow of capitalism’ as his hobby for his Who’s Who entry, is still on the same mission more than 30 years later

In fact, GLC officials calculated that government spending limits would result in a gain of £25 million — and that the GLC was ‘awash’ with cash that had previously been budgeted and unspent under McDonnell’s watch as Head of the Finance Committee.

But he reacted with ‘cold fury’ when confronted with the details by Race and fellow senior civil servant Peter Brayshaw in his County Hall office across the river Thames from the Houses of Parliament and ordered them to destroy their findings.

Race, now aged 72, and Brayshaw — who died in 2014 — were so appalled by McDonnell’s behaviour they refused to work with him.

In a memo marked Private and Confidential, from Reg Race to Livingstone, dated March 13, 1985, Race warns that it was by then impossible for himself and Brayshaw, then assistant Director General of the GLC, to engage with McDonnell.

‘Whatever the political considerations might be, it would be pretty impossible for Peter Brayshaw and myself to work on a continuing basis with John McDonnell,’ said Race.

‘Working relationships were never good, now they are non-existent; and I, for one, am not prepared to advise a Member on policy only to have that advice shredded or denounced in public at party functions.’

Livingstone, now 74, himself wrote an excoriating 15-page confidential report to the GLC Executive Committee in which he accused his former close ally of lying, mismanaging the council’s budget, and failing to respond to concerns raised by officials.

‘The weekly meeting to discuss the Budget was often cancelled, and important issues were not raised. Papers on Budget Options .. . were not discussed and John McDonnell ordered that the papers be shredded,’ Livingstone reported. ‘Reg Race wrote three times to John McDonnell to resolve these issues. No reply was received.’

McDonnell himself has compared his GLC role in the early Eighties to that of UK chancellor — and the Mail’s dossier provides disturbing evidence of his approach to taxpayer funds. He is pictured with Ken Livingstone above

Livingstone accused McDonnell of failing to publish a public budget consultation and said: ‘I can only conclude that John McDonnell does not want an open debate about the true financial position.’

Livingstone said McDonnell repeatedly assured him that the claim of £140 million in cuts was accurate — only to discover the truth a week before the GLC was due to vote on its budget.

It must have been quite an achievement to be lectured on financial responsibility by ‘Red Ken’ Livingstone!

The row split the Labour group, with McDonnell leading a group of ten hard-left rebels.

Livingstone’s confidential report continued: ‘In the late afternoon of Thursday, February 28, Reg Race asked to see me in order to voice his fears that the paper to be published the following day was not in line with party policy and the state of our finances was such that instead of facing £140 million of cuts we could have £25 million of growth.’

Livingstone, who sacked McDonnell because of his behaviour, said the bombshell wrecked his plans to defy the Thatcher Government and led to GLC members voting for a budget even lower than that proposed by the Tories.

‘Many felt that we had been misled and manoeuvred into an unreal position and it would be hard to maintain credibility when the true facts became known,’ he complained. In a direct attack on McDonnell, he concluded: ‘We need to remember that those who control access to information have a duty to share that openly with the rest of the movement.

Back in the Eighties, he described the so-called ‘rate-cap rebellion’ by the GLC and other mainly Left-wing councils against the Tory government as an opportunity to open a ‘second front’ alongside the miners’ strike to bring down Thatcher

‘Hiding the real position about the council’s finances did not change the facts and simply made it more embarrassing when the truth was known.

‘Telling the public that government policies will lead to immediate massive cuts creates real problems for the credibility of the party when those cuts don’t happen.’ Another internal report obtained by the Mail was written by John Carr, then a GLC member for Hackney Central, who blamed McDonnell for the rate-capping ‘debacle’ and described the ‘anger, confusion, suspicion and feeling of betrayal’ caused by his actions.

Carr was also furious that — for all his claims of supporting the working class — McDonnell’s disastrous strategy ultimately led to less money being provided to channel to vital services, including education in London.

He blasted: ‘The trade unions and the wider public had been repeatedly told . . . that the (Government) rate cap meant cuts of £140million.

‘In propaganda of various sorts and at public meetings all over London, GLC Members had been describing the horrendous job and services losses, and losses to community groups, that would follow if the rate cap stood.

‘In the event, at the Labour Group on March 4 (1985), the Chair of the Finance and General Purposes Committee, John McDonnell, finally revealed that cuts of only £30 million would be required to meet the rate cap.

‘However, it then also emerged that John McDonnell had been consistently refusing to work with Reg Race, Head of the Programme Office, to compute an alternative basis for the budget which could not only protect 100 per cent of all existing budgets but also fund £23 million of growth.’

He went on: ‘Many otherwise sympathetic comrades on the Labour Group did feel that important and relevant information was being deliberately withheld from them. Worse, they felt that they were being lied to or manipulated or both.

‘In the end, we managed to snatch a defeat out of the jaws of victory. I hope that I have managed to convey a sense of the anger, confusion, suspicion and feeling of betrayal that descended upon the great majority of the Labour Group . . . that . . . night.’

Carr concluded that vital financial help to underprivileged London boroughs — some of the poorest in the country — has been ‘greatly jeopardised’ as a result of McDonnell’s tactics and that it would be ‘much harder’ to help the cash-strapped Inner London Education Authority.

Carr, who is married to a former health minister in Gordon Brown’s government, has left politics and now works as a charity web consultant.

A former senior GLC official, who does not want to be named as he fears a backlash from McDonnell loyalists, was scathing in his denunciation of the shadow chancellor’s record.

He said: ‘He was deliberately lying to Londoners and the Labour movement, knowing that his cuts argument was wrong. The question arises: if he is prepared to behave in such a way, what would he do in respect of the national finances if he were Chancellor?’

The source, who witnessed many of the confrontations first-hand, said McDonnell reacted with ‘cold fury’ when told by civil servants that his claims about Tory cuts were bogus.

‘McDonnell had a nice office overlooking Westminster. Race and Brayshaw went to see him and told him that, while he was saying they would have to make £140 million worth of cuts, you have all these reserves and the Capital Fund you can use. You don’t have to make any cuts at all.

‘McDonnell couldn’t argue because the evidence was robust. He was just terribly angry that he had been caught out.

‘He didn’t shout, he didn’t swear, he didn’t wave his arms about. It was just very controlled anger. Finally he just said “destroy this document — don’t show it to anybody”. It was just extraordinary.

‘After that time, trust had completely dissipated. McDonnell wasn’t capable of being spoken to.’

The source added: ‘McDonnell had just invented his claims about the levels of cuts. He hadn’t got any information at all — he had absolutely no basis whatsoever.

In the documents, both Livingstone and senior GLC civil servant Reg Race directly accuse McDonnell of ordering that papers which set out the council’s true financial position be ‘shredded’ [File photo]

‘He had a very clear policy of supporting the National Union of Mineworkers. The phrase “second front” was used all the time. The strategy was bring down the Tory government, full stop. They thought they would create the most enormous crisis for the Government but it was completely foolish. I put it down to naivety and revolutionary zeal.’

The source said GLC officials were also appalled by McDonnell’s management of the day-to-day finances of Europe’s largest city council.

‘There was roughly a 60 per cent underspend of the revenue. Revenue that was expensively, provocatively and outrageously — as far as the Press was concerned — demanded from GLC ratepayers was sitting there in the bank doing b****r all. That was wrong on both levels, for the ratepayers and for the council. It just couldn’t go on like that.’

For his part, a spokesperson for John McDonnell told the Mail this week: ‘This is completely untrue and bears no relationship to reality. These reports were prepared to justify the betrayal of the rate-capping campaign by some GLC councillors and a political adviser.

‘All the budget reports presented to the Greater London Council by John McDonnell were prepared and signed off by the GLC’s finance officers, lawyers and Director General for their accuracy and probity.’

Undaunted, today, McDonnell hopes to take charge of the country’s £810 billion-plus national budget. Significantly, when asked on his first morning as Shadow Chancellor about his suitability for the job, he said he was ‘chancellor of the exchequer for London at the age of 29’.

It was a hollow boast, bearing in mind he was sacked by Livingstone. Indeed, McDonnell was considered Red Ken’s most dangerous rival within the GLC Labour group.

To McDonnell, his boss was too ‘middle of the road’. It was McDonnell, not Livingstone, who suggested that the GLC Labour Group hold open talks with the IRA in the week that a nail bomb at Chelsea Barracks had killed two pedestrians.

In three disastrous years as chairman of the finance committee, McDonnell took London to the brink of ruin

Livingstone wrote about the rate-capping dispute in his book You Can’t Say That and recalled that when he found out about McDonnell’s bogus budget, he told him: ‘We’re going to look like the biggest f***ing liars since Goebbels.’