Shadow chancellor struggles to state size of UK deficit and admits plans to nationalise water companies are not yet costed

John McDonnell has struggled to state the size of Britain’s spending deficit and admitted Labour’s plans to nationalise water companies have not been costed.

In an interview for BBC Radio 4’s Today programme before Tuesday’s manifesto launch, the shadow chancellor was thrown by a question about how big the deficit is.

Stalling to give an answer, he repeated the phrase “we need the investment” three times then denied he was being handed a piece of paper with the correct figure.

General election 2017: McDonnell confirms Labour would nationalise water industry, but unable to state cost– politics live Read more

He then said the projected deficit was between £68bn and £70bn – the actual figure is £52bn.

McDonnell also confirmed Labour’s plans to nationalise the water industry, a policy that was not included in a leaked version of the party’s draft manifesto last week.

Speaking in Bradford on Tuesday morning, McDonnell said: “We are concerned [about] the way privatisation has operated, particularly in the water industry … In one year, £18bn was given out in dividends to shareholders. All of that could have been used in investment in the water industry and bringing bills down. We believe this is an industry that should be bought back into public ownership for public benefit.”

He added: “We will seek to negotiate and we’ll look at the option of how we bring it back into public ownership. One is, yes, an outright purchase. That could be done and we wouldn’t want to set the price for that now because that would affect the negotiations. Also we could offer bonds for shares in [an] exchange scheme. There are different mechanisms that can be used which minimise the overall cost but maximise the advantages of bringing it back into public ownership.”

But when asked if the idea had been fully costed, McDonnell said: “We will consult on the mechanism in which we go forward on this. We will offer the different options on how we go forward. And one of them could be a switch from shares to bonds.”

Last week, the Institute of Fiscal Studies said Labour’s draft manifesto would amount to the biggest state intervention in the economy since the 1970s outside of a crisis.



Challenged about that claim, McDonnell said: “It is a significant intervention by the Labour government that will be elected in June because that’s what needed.”

In a series of broadcast interviews before the official manifesto launch, McDonnell said Labour’s policies met a public appetite for change and a fairer society.

“Someone was so enthusiastic about our policies that they leaked it early for us,” he joked to Sky News.

Speaking to BBC Breakfast, he said: “We have already seen as a result of leaks our policies being extremely popular: bringing rail back into public ownership, ending the cuts in school budgets, properly funding the NHS, making sure we have a fair taxation system. All of those are extremely popular amongst the general public and I think that will be translated into votes on the day of the election.”

How will the average person's tax burden change under a Labour government? Labour has pledged not to raise the tax burden of those on low and middle incomes. The standard income tax rate will remain unchanged as will VAT. That means someone on the average wage of £26,500 will pay the same. Labour plans to apply the 45p rate to the 500,000 who earn between £80,000 and £100,000. The Institute for Fiscal Studies said this group would pay on average £400 more a year. The 300,000 earning between £100,000 and £123,000 would lose up to £2,725 while the 50,000 earning over £500,000 would all lose at least £22,900 a year. Philip Inman



He dismissed claims that the policies would cost £93bn as “nowhere near” the real figure but declined to give details of the costings until the manifesto launch at 11am.

He also defended plans to tax the richest 5% of earners. He said: “We just want to bring back fairness again into our society, so we can have that modern economy that will create that prosperity but where that prosperity will be shared by everybody.”

He refused to rule out reports that Labour was planning a 50% tax rate for those earning over £150,000. He said: “We are asking people to pay little bit more who are the highest earners.”

Asked about public perceptions of Labour’s leader, McDonnell said: “The more Jeremy Corbyn gets out there, the more media coverage he gets, the more people realise the sort of decent, honest person he is and the type of leader he is. He brings people together, builds consensus – the sort of leader that we want for the future of our country. I think that will translate itself into people voting in the ballot box.

“When he’s touring round the country, literally thousands of people are turning up. Meetings are being swamped and also thousands of people waiting outside … wherever he goes. Underneath the surface, I think you are seeing a rumbling now that people want change. They want a different type of leader. They want someone who is a man of the people.”

Asked if Corbyn would step down as leader if Labour lost the election, McDonnell said: “We’re going to win this election. That’s a hypothetical question that doesn’t even deserve looking at.”