Shadow chancellor has told civil servants how he wants them to shake up the economy under a Corbyn government
Treasury officials have been told to prepare for an emergency budget within 10 weeks of Labour taking power under party plans for a Corbyn government if there is a snap election.
John McDonnell, the shadow chancellor, has written to Sir Tom Scholar, the Treasury’s senior mandarin, to warn him that Labour would tear up government plans for a three-year spending review and replace it with five-year plans for spending in government departments.
The letter, obtained by The Sunday Times, details plans by the shadow chancellor to shake up the way the Treasury runs the economy and ensure it focuses on delivering Labour’s main policies, including nationalisation in the energy industry and other businesses. In what amounts to the most radical shake-up of a key department for a generation, McDonnell outlined plans to:
■ Demand that the Treasury “widen the range of economic theories and approaches in which its officials and those in the rest of government are trained”, a move likely to pave the way to rewrite economic models to include more left-wing economic theories.
■ Bring back public service agreements — created by Gordon Brown and scrapped by George Osborne — between the Treasury and other departments. The move will be billed as a means of safeguarding taxpayers’ money but would also hand McDonnell widespread control of public spending across Whitehall.
■ Make Treasury officials consult members of the public and trade unions in “listening exercises” around the country.
■ Tell civil servants that all policies should focus on “the reduction of inequalities and poverty” for “people right across the UK”.
■ Put green targets at the heart of all economic decisions.
The letter comes amid speculation that Theresa May might contemplate calling a general election to save her premiership. McDonnell has written to Scholar because mandarins have banned Labour from formal meetings with civil servants on the grounds that the next election is not due until 2022.
The shadow chancellor writes: “I would like you to plan on the assumption that there will be an early budget to be undertaken as soon as practically possible. In any event I would want to conclude this within no more than 10 weeks. This will focus on urgent spending priorities as well as tax proposals.
“To encourage the longer-term approach to public expenditure planning which will need to be part of the delivery process, I intend to change the spending review period from the current period which has normally (but not always) been three years to a period of five years.”
While the letter does not go into any detail about Labour’s plans for nationalisations, party sources said they would be a “top priority” and pointed out that McDonnell had previously said he would set up a dedicated Treasury unit to oversee the return of private companies to the public sector.
A senior Labour source said: “This shows that we have a serious plan for government and we will be ready to hit the ground running when we win power.”
The Sunday Times, 24 March 2019, Tim Shipman