Michael Izza, chief executive of accountancy body the ICAEW, said the UK was in a new era of politics and welcomed McDonnell’s call for debate on a number of pressing issues.
“Fixing our public finances is dependent on generating sufficient tax receipts, so we are pleased that our calls for more resource for HMRC to concentrate on tax avoidance have been heard. Reviewing the Bank of England’s mandate is perfectly reasonable after 18 years, as is looking at the Treasury. We have suggested that Treasury must be transformed into a modern finance ministry, with responsibility across all parts of Whitehall,” he said.
“It will be interesting to see what policies Labour come up with in the months and years ahead. Businesses across the country will welcome the opportunity for debate going forward.”
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said business had to be at the forefront of debate and claimed “the shadow chancellor wasn’t in the business of making detailed policy pronouncements.”
“If this is the start of a conversation that will shape the opposition’s agenda on growth then business will want to be part of it, however, as they will be the ones making long term investments in technologies that will underpin future competitiveness and support skilled, well paid jobs,” Hopley said.
“There are some areas where the shadow chancellor will arguably need to proceed with caution. Most businesses pay their taxes and the debate on doing more to get a fair share from the corporate sector must go hand-in-hand with ensuring that the UK is a competitive magnet for investment and that future tax policies will offer businesses predictability and stability.”
Discussing the Living Wage she added it was “not the time to pencil in further rises beyond those already signalled by the current government.”
Meanwhile, the CBI was more critical. “The shadow chancellor was strong on intent but has not yet provided great detail on how he intends to deliver his plans. The overall impression of this speech was of rather more intervention in the world of business and the economy,” said director-general John Cridland.
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“What’s clear to us is that you can’t be pro-growth and pro-jobs without being pro-business. And a thriving private sector is essential for raising living standards and paying for high-quality public services. We share the aim of seeing more people getting into higher-paid jobs but pay rises need to be sustainable and affordable – and based on rising productivity.
“McDonnell talks of working in partnership with businesses and entrepreneurs, and recognises the importance of deficit reduction, infrastructure, and skills. But this is best achieved by liberating entrepreneurs to create wealth and jobs.
“We welcome the commitment to the Bank of England’s independence but it remains to be seen what active monetary policy really means. There’s a risk that when the economy is close to full capacity intervening in monetary policy could increase economic volatility, push up inflation and raise borrowing costs for households and businesses.”
John Longworth, director-general of the British Chambers of Commerce was also concerned. He said: “There is a difference between an entrepreneurial state – one that supports growth and innovation – and a big state, reaching into, and directing, every facet of business and national life. As it develops its economic policies, the leadership of the Labour Party must not confuse supporting growth with state control over the economy.
“McDonnell is right to go back to first principles and review the shape of the UK economy. He is right to start fundamental reviews of how the Treasury and the Bank of England work. He is right to engage economic experts to look in detail at how the state can better support economic growth.
“However, he must not prejudge these reviews – or insist on attacking businesses and wealth creators, when a conversation is what is needed. Labour needs to get the tone right if it wants to build a partnership with business, in the national interest.”