Mishal Husain: Let’s start with that economic picture. Do you agree with what the OBR said about growth; essentially that we’ll be poorer for longer, and about productivity?
John McDonnell: I have to, based upon the information that they’ve arrived at that judgement. I think it’s something that we’ve been pointing out for a number of years now; that if you don’t invest in your economy, inevitably that will impact upon productivity, and that will impact upon growth, and, importantly, that will impact upon people’s wages. The prediction now from The Resolution Foundation is that average annual pay is going to be £1,000 lower in 2022 than it was forecast in the March 2017 budget, so it’s going to hit all of society.
MH: Your answer to the productivity problem, this deep-seated problem that’s been dogging our economy more than others, is investment, is it?
JM: It is. It’s investment over the long term and that’s not what we’ve had. And you’re right to point out that other economies are growing across Europe now, and across the world. And I think that that is as a result of government intervention investment, and that prises in business investment as well.
MH: It’s interesting that you seem to have such a simple answer, when the OBR and economists in general see this as such a difficult and complicated problem. I mean the OBR, for example says that the reasons for our productivity at the moment could be Brexit, could be the overhang from the financial crisis, could be banks’ under- performing loans, could be the era of low interest rates. It’s all sorts of different things.
JM: Well if you look at what I’ve been advocating, not just for the last couple of years but basically for the last ten years or longer, it is about long term stable investment, patient investment, and that’s exactly what we’ve been arguing for in terms of how you structure your economy as well. That’s why I put forward the proposals for a national investment bank that will allow access to private sector funding as well as state funding. If you look at the…
MH: Just give me an example of that, because this is such an important problem that we’re going to face. So, give me an example of something that the national investment bank would do under Labour that would bring productivity up from the flat level it is at the moment and in what sort of time frame.
JM: OK. Well the proposals we’ve put forward is to have a strategic investment board, which would bring together the Treasury with the Bank of England, the Business department, bring together business leaders as well, working with the national investment bank, identifying the long-term investment projects that are needed. And in particular, what we’ve been saying since I’ve been Shadow Chancellor, for two years solidly, is about investment in new technology, which enables us to bring new products forward and create new markets.
MH: Over what sort of time frame?
JM: Well the lifetime of a parliament is five years, but what I was looking forward to was a ten-year investment programme.
MH: So, does that mean that if we’re flat at the moment and Labour was elected now, how long would it take you, with the changes that you’d bring in, to get productivity up to a two per cent level, which is what we had and is what we need?
JM: These things are always difficult to predict. But I believe we can make a start within the lifetime of a parliament, to start tackling the productivity crisis that we’ve got. And I’ve been saying this for a number of years.
MH: So, it’s a start rather than an end point.
JM: Well I think we could achieve it. If you look at our international competitors that’s exactly what they’ve done. Look at the U.S. They’ve intervened as a state to help companies; Apple was started on a government grant, for example. Look what’s happening in China; look what’s happened in Japan in terms of their robotics strategy. That’s gone on for over a decade now.
MH: Or look at what’s happening in France, where they have higher productivity than us, but also higher unemployment.
JM: That’s true. That’s the skill you need in government: to ensure that you invest in such a way that you do not displace jobs, you create new jobs, and I think that’s what we can do. In the fourth industrial revolution that I’ve been talking about for a number of years now – if you look at what happened in South Korea, with new technology development – they’ve actually increased the number of jobs. It has to go alongside investment in education. We’ve said we’ll bring forward a national education service. What I was disappointed with yesterday, was there was next to nothing for education. You know, £147 million when ten times that is needed.
MH: £40 million to maths, £600 premium for schools for each pupil taking A level maths, more science teachers….
JM: Look at what’s happening in education overall. The amount that was brought forward, (and of course I always welcome some additional funding), but it’s nothing on the scale that’s needed. 5000 headteachers wrote to the Prime Minister last week and said we have got to stop the cuts in our schools. Some of them are actually writing to parents asking them to donate, to make sure the schools can get by, and that’s just not acceptable.
MH: So your plans are predicated on raising more money through taxes, and on borrowing. Now yesterday when you were asked the amount it costs us to service our debt, you struggled a bit with the figure.
JM: Now look…
MH: No, what I want to know is have you worked out, do you have a figure for how much more it would cost to service our debt every year under Labour?
JM: The type of journalism where you go into an interview and someone asks you a question of a particular figure is to be honest a trite form of journalism. That’s why we have iPads, we have advisers etc. So, look, let’s get back to the reality of this. What I’ve been saying consistently about this budget and when I was interviewed I believe on your programme last week, is if the government stopped the tax cuts to the corporations and the rich (because it’s £76 billion being given away over the next few years on that) they would have been able to invest in our public services.
MH: But I…
JM: Let me just finish, if I can.
MH: I asked you about servicing the national debt, which costs about £48 billion a year at the moment. How much would it cost under Labour every year?
JM: Well what we would do is ensure that day-to-day spending was not paid for by borrowing. It would be paid for by our tax system, and that means stop the tax giveaway to the rich and the corporations. We would only invest for our infrastructure, and that investment would pay for itself on the basis of the growth we would achieve.
MH: And when you first borrowed for that investment, what would it cost in the servicing of the debt – how much would it add to that £48 million figure?
JM: We’re now at the stage that interest rates are so low, that you’d borrow in the initial phase, and you’d borrow in a way that grows the economy with those specific infrastructure projects.
MH: Interest rates are going up.
JM: Well yes, but they are still at historic lows and do you know it’s not just me who’s saying this; Sajid Javid the cabinet minister only two weeks ago said to his own chancellor that now the interest rates are so low, we should be borrowing to invest. He said £50 billion for housing and I agree with him.
MH: We all know that you would borrow to invest. The question that I’ve asked you a couple of times now is how much it would add to the servicing costs every year?
JM: It’s minimal, because interest rates are so…
MH: What is minimal?
JM: Minimal. We’re literally talking about it paying for itself. If you look at the OBR’s multipliers…
MH: Are you talking about a minimal increase?
JM: No. We’re talking about it paying for itself. A one to one multiplier; that’s the standard analysis by the OBR and others. When you invest what you do is you grow the economy and as a result of that…
MH: Over the long term. But if you were elected today how much above £48 billion would we pay to service our debt next year?
JM: It’s minimal, because it would be returned rapidly to you, and that’s about investment…
MH: What’s the figure?
JM: I’m telling you it pays for itself.
MH: You’ve also said it’s minimal. I’m wondering what the figure is? Do you know?
JM: It pays for itself.
MH: How does borrowing something pay for itself? There’s a cost. When you borrow there’s a cost to paying that back.
JM: Because immediately that infrastructure puts more people back into work. They pay their taxes and as a result of that you are able to cover your cost. Simple as that. So, every infrastructure project you put out there immediately starts employing people, they start paying their taxes and as a result of that you cover your costs. You grow the economy because that has a multiplier effect all the way through the economy.
MH: You talked about thinking that the Chancellor hasn’t spent enough on education in this budget. Which parts of this budget would you vote against? Would you vote against the £3 billion that he’s setting aside to prepare for Brexit in the next years?
JM: We want more details on all these individual issues, before we decide what we are going to vote on. A lot of this is uncertain and I just give the examples. He said yesterday that he was going to tackle the issue of nurse’s pay. We now know that it’s going to be a negotiated settlement. But in those negotiations, we discover in the detail of the red book, it’s going to be dependent on what they call modernisation of the terms and conditions. What nurses are now saying is that modernisation may well be undermining our terms and conditions. So we’ll look in detail at every aspect of that budget before we determine next week how we are going to vote. Then we’ll see the Finance Bill and again we’ll be looking at the detail of that.
MH: You said to us last week that you wouldn’t set aside money for planning for Brexit – is that still the case?
JM: What I said was I wouldn’t set aside money for a no deal Brexit, because I believe we can get a deal. But there’s some in that cabinet, that Tory cabinet, that I think are angling at a no deal. Why? Because, exactly as Philip Hammond said 18 months ago; Britain as a tax haven off the coast of continental Europe.
MH: John McDonnell, thank you.