Shadow chancellor John McDonnell guaranteed to give workers the right to own a stake in their enterprises if Labour returns to government.

Speaking at the Ways Forward conference in Manchester on Thursday, Mr McDonnell said a future Labour government would seek to grow co-operatives as well as enable employees the first chance to buy their companies in the case of them being closed down or sold on.

He mentioned the 30-year-old Marcora Law in Italy, which ensures that workers made redundant can use their redundancy payment, to set up co-operatives.

An incoming Labour government would also take forward Graeme Nuttall’s report on employee ownership commissioned under the coalition government, he said.

“We will look into the recommendation in Graeme Nuttall’s report on employee ownership, creating a statutory right to request employee ownership and have proposals considered by their employers,” said Mr McDonnell.

“We should look to extend this approach, offering employees first rights on buying out a company or plant that is being dissolved, sold, or floated on the stock exchange.

“The Tories have offered a Right to Buy, Labour would seek to better this. We’d be creating a new Right to Own,” he said at the conference, which was organised by Co-operative Business Consultants.

The shadow chancellor also argued that Labour needed to defend past achievements while “thinking beyond using the state to redistribute incomes”.

Shared ownership and democracy have a role to play, said the shadow chancellor. “At the heart is the case of fairness; we currently live in an economy that is failing,” he said. Mr McDonnell talked about inequality affecting the UK, arguing that people had lost trust in major institutions.

“We must learn about the kind of economy we want, that’s why this conference is so significant, we must present a positive case for the future.” Speaking about the 7,000 co-ops around the UK, he said that co-operative businesses were more stable. He also gave the example of Oldham council, which worked with local credit unions to provide financial services for residents.

Similarly, in Preston the council used the Cleveland model from the USA to create new partnerships with local anchor institutions such as the university of Central Lancashire. The university changed its procurement policy to spend money locally and the council is also looking at creating co-ops as part of this strategy.

A future Labour government would not only increase public spending but also invest in infrastructure. Mr McDonnell pledged to introduce a fairer tax system to make sure large corporations paid a fair amount of tax. “We can’t pretend state spending is the answer to everything, but clearly things can be achieved,” he said.

Seema Malhotra, shadow chief secretary to the Treasury, is leading the Labour Party’s review to determine whether the current tax breaks for businesses are helping or hindering businesses and families. “We’ll create a fairer tax system,” said Mr McDonnell, adding that this could help co-operatives as well. Initial funding is a problem for many start up businesses, including co-ops, he argued. The solution envisioned by the shadow chancellor is to break up the monopolies of banks and ensure regional local banks are involved. New businesses should also work with local authorities and trade unions more, he said.

“No other major developed economy has just five banks providing 80% of loans. We’d look to break up these monopolies, introducing real competition and choice. Regional and local banks, prudently run and with a public service mandate, have to be part of the solution here.”

The shadow chancellor said co-operation was an idea whose time had come again. “This is the start of developing a new, positive economic alternative for Labour,” he said, adding that the party needed to look at new possibilities including the “explosion of sharing that the internet can provide”.

“We’ll ask ourselves how the practical everyday principles of co-op movement can be applied,” he added. “There’s a potential now we can show, in every act of government, that co-op principles need to be applied in every policy.”