John McDonnell has outlined Labour’s proposed employment measures to bolster the strength of unions and transform the gig economy in a speech to the Trades Union Congress.

The shadow chancellor said the measures would produce a new workplace environment which would boost the UK’s economy if the party formed the next government.

“Our programme of workplace reform will restore the balance between employer and worker, and it will do so by installing basic trade union rights in law again, modernising corporate governance structures and extending the opportunity for employees to share collectively in the benefits of ownership of their company,” he said in Manchester on Tuesday.

A Labour government would ban zero-hours contracts, repeal the Trade Union Act, clamp down on bogus self-employment, end private finance initiatives and set up a department for employment to implement the policies, he said. There would be a particular emphasis on workers in the gig economy.

Workers in jobs with flexible hours and short-term contracts could be given similar rights to those in permanent work, including eligibility for sick pay, parental pay and similar benefits, he said.

Government contracts would only be given to firms that allowed collective bargaining and a Labour government would relaunch employee ownership funds, under which staff at larger companies would receive shares in order to give them a stake in the profits and management of their firms.

McDonnell also repeated a promise that Labour would spend £500bn over a decade to fix Britain’s crumbling infrastructure.

This would include road and rail, digital, research and development and alternative energy sources, he said, adding that the £500bn figure was supported by the Confederation of British Industry (CBI), with whom Labour was working to develop the proposals.

McDonnell received a standing ovation after the speech and the Unite general secretary, Len McCluskey, said the measures would be applauded across the UK.

“It is simply not right for the sixth richest country on earth to have allowed a situation to develop whereby a worker only knows if he or she will earn a wage that day when they get a text message to tell them that they have a shift,” McCluskey said.

Paddy Lillis, the general secretary of the shopworkers union Usdaw, said: “It is clear that Labour fully understands the problems low-paid workers have in getting enough hours to make a weekly wage they can live on.”

A CBI spokesman said the group would examine McDonnell’s proposals. “The CBI backs investment in infrastructure to help drive up UK productivity, but this must be done within the constraints of sustainable public finances. It’s not clear that Labour’s proposals meet this test.”

Earlier in the day, McDonnell dismissed the idea that Labour had been infiltrated by hardliners who were seeking to push out MPs such as Frank Field – who has now quit the party whip – and Joan Ryan, both of whom have had no-confidence motions passed against them by local parties. Rosie Duffield, the new MP for Canterbury, was also threatened with such a move.

“We now have 500,000 members,” McDonnell said. “It’s a huge, mass party now, and of course those members want to get involved in discussions about policy, and also they will reflect at times their view about the performance of their local MP.”

One senior Unite official said MPs who faced deselection threats were at fault for failing to back Jeremy Corbyn’s policies.

At a fringe TUC meeting, Howard Beckett, an assistant general secretary who has been tipped as a possible future leader of the union, said: “For those who got a vote of no confidence, it’s very much been with regard to their own voting record – people who abstained over the welfare bill, people who have repeatedly voted against the wishes of their electorate and use Brexit in a way that undermines the position of the party.

“The biggest example is with respect to Frank Field’s recent resignation – undoubtedly the bulk of his constituents had a vote of no confidence in Frank Field because he voted with the government whenever there was an opportunity to bring down a government that believes in austerity.”