Credit: Transition Heathrow

Should business be worried about new shadow chancellor John McDonnell?

Jeremy Corbyn's closest ally has suggested nationalising banks, amongst other things.

by Rachel Savage
Last Updated: 23 Sep 2015

Were business leaders crying into their cornflakes this morning over news that new Labour leader Jeremy Corbyn had appointed his closest ally, fellow hard left-winger John McDonnell, as shadow chancellor last night?

Probably not. The socialist tenor of the (as-yet incomplete) new shadow cabinet makes it increasingly unlikely it will ever get the blessing of the electorate - if Labour MPs even let it survive five years. But there is reason for corporate Britain to be concerned.

McDonnell, who lists one of his hobbies as ‘fermenting the overthrow of capitalism’ (getting CEOs drunk on homebrew praps) in his Who’s Who entry, has a collection of views guaranteed to send a shiver down the spine of any supporter of free enterprise.

In a blog just over a month ago he called for the railways to be renationalised and energy to be ‘socialised from below’. ‘Short-term shareholder value’ will be replaced in law with ‘long-term sustainable economic and social responsibilities as the prime objective of companies’ (no details on how that fuzzy idea would be defined). A financial transactions tax, of the sort the Tories have been fending off from Brussels, will be whacked on the City.

In 2012, he argued the Bank of England’s control over interest rates should be ended and nationalised banks bought ‘under direct control to force them to lend and invest their resources’. And McDonnell hasn’t toned down his rhetoric recently - apparently we live in a ‘corporate kleptocracy’, that is a ‘form of feudalism,’ he said on Sunday. MT looks forward to a socialist utopia, devoid of foreign investment, where HSBC et al have made good on their threats to take their business – and all the jobs that go with it – elsewhere.

Meanwhile, Corbyn himself has refused to carte-blanche support staying in the EU (apparently to not give David Cameron a ‘blank cheque’ over his renegotiation of the UK’s membership), according to the resignation statement of the centrist shadow business secretary Chuka Ummuna. That raises the prospect of both major parties being divided over the impending referendum, unable to make unified cases for a single market that, despite its faults, most businesses want to be a part of.

To be fair to Corbyn, his team’s economic ideas haven’t been roundly condemned by business, which doesn’t have a single unanimous view anyway. The British Chambers of Commerce, for example, welcomed his support for ‘much-needed investment in the UK’s inadequate infrastructure and skills.’

But if McDonnell continues to wage his war of words, with Corbyn’s support, there is a danger that popular sentiment could turn even colder towards British business (Winter is coming, after all).

And, perhaps most importantly, business needs well-considered, thoroughly scrutinised laws as much as any ordinary voter. You can’t have good government without a strong opposition to criticise, hold accountable and generally keep it on its toes and a Labour party in a state of civil war over Corbyn’s hard-left line will not be able to do that.

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