John McDonnell has announced a radical Labour plan to commit £400bn of investment to what he called the twin crises of the climate emergency and social deprivation, saying “future generations would never forgive us” if rapid action was not taken.

The shadow chancellor used an election campaign speech in Liverpool to outline the economic priorities of the party, and said a Labour government would change the fiscal rules so borrowing for investment would be excluded from borrowing targets.

McDonnell, who said his programme was “in the best tradition of British socialism” in the footsteps of Hugh Dalton and Gordon Brown, also promised to shift significant political decision-making power from London to the north.

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He said much of the planning for investment would be devolved, that part of the Treasury would be moved to the north of England and that his ministerial meetings would be held in other places as well as London.

“What does this mean?” he said. “It means that the centre of political gravity is shifting away from London. It’s coming back home to the north.”

Speaking soon after the chancellor, Sajid Javid, had announced that the Conservatives would revise their own fiscal rules to be able to spend an extra £20bn a year on infrastructure, McDonnell said far greater ambition was needed.

As well as £250bn in investment over 10 years for a green transformation fund to invest in areas such as clean energy and home insulation, Labour also pledged £150bn over five years for what it billed as a new social transformation fund.

This would be spent on infrastructure projects, such as schools, hospitals and social housing, to “begin the urgent task of repairing our social fabric that has been torn apart by the Tories”, McDonnell said.

McDonnell urged voters to ignore Conservative pledges of more spending. “They treat us all with contempt,” he said. “They think people are stupid. That with Brexit on the agenda, they think we’ll all forget about the past 10 years and the prospect of the next five years if they get back.”

The election was “a once-in-a-generation chance to get back on track”, he said, with the focus on the climate emergency and crumbling social infrastructure.

Facebook Twitter Pinterest John McDonnell announces his plans in Liverpool. Photograph: Oli Scarff/AFP via Getty Images

Asked after the speech whether the amount pledged could spook money markets and lead to interest rate rises, McDonnell said: “Our scale of investment matches the scale of those emergencies that we now face, on climate change and socially. I’ll tell you, if we didn’t set off on that march, future generations would never forgive us.”

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McDonnell insisted that any Brexit deal negotiated by Labour would not affect the spending plans if it was eventually endorsed by a second referendum: “Whatever deal we seal will enable us to go ahead with our programme.”

He said fully costed spending and investment plans would be spelled out in Labour’s manifesto, and that cheap and plentiful government borrowing made the programme realistic. “There’s no shortage at the moment of demand for government bonds across the world,” he said.

“Our aim as a Labour government is to achieve what past Labour governments have aspired to: an irreversible shift in the balance of power and wealth in favour of working people.

“That means change, real change. It means investment on a scale never seen before in this country, and certainly never seen before in the north and outside of London and the south-east.

“To achieve that objective also requires therefore an irreversible shift in the centre of gravity in political decision-making, as well as investment in this country, from its location solely in London, to be relocated to the north and regions and nations of our country.”

Spending would be guided by a national investment bank, with a series of regional arms, he said, with “decision-making devolved down to local communities”.