McDonnell opened by saying Labour ‘will force people like Starbucks, Vodafone, Amazon and Google and all the others to pay their fair share of taxes'. He also promised what he called ‘cuts to the corporate welfare system’, along with cuts to subsidies paid to companies that ‘take the money and fail to provide the jobs’. This could include reviews of a raft of corporate tax breaks including capital allowances and research and development (R&D) tax reliefs.

However, McDonnell’s speech did not directly address the question of the introduction of a financial transaction tax, which he is known to favour, nor possible increases to higher rate income tax, although he did say: ‘Where money needs to be raised it will be raised from fairer, more progressive taxation. We will be lifting the burden from middle and low-income earners paying for a crisis they did not cause’.

McDonnell announced that Labour has asked Lord Bob Kerslake, former head of the civil service, to bring together a team to review the operation of the Treasury, and there is also to be a review of the operation and resourcing of HMRC which he said was to ‘ensure that HMRC is capable of addressing tax evasion and avoidance and modernising our tax collection system’. 

In addition, there will be a review of the Bank of England, which McDonnell made clear would continue to operate independently, in order to investigate its mandate particularly in relation to the inflation target.

Labour is to set up an Economic Advisory Committee to advise on the development and implementation of economic strategy with members including Joseph Stiglitz, Thomas Piketty, Professor Mariana Mazzucato, Simon Wren Lewis, Ann Pettifor and David Blanchflower, former member of the Bank of England Monetary Committee.

McDonnell said that Labour will demand that the Office of Budget Responsibility and the Bank of England provide resources to test that its plans are workable and affordable, saying: ‘These bodies are paid for by taxpayers and therefore should be accessible to all parties represented in Parliament. In government we will establish and abide by that convention.’

As regards tackling the deficit, McDonnell said ‘fiscal policy will be used to pay down the debt and lower the deficit but at a speed that does not put into jeopardy sustainable economic growth.’

‘We’ll use active monetary policy to stimulate demand where necessary. We’ll also turn the Department for Business, Innovation and Skills into a powerful economic development department, in charge of public investment, infrastructure planning and setting new standards at work for all employees,’ he said.

Responding to the shadow Chancellor’s speech, Michael Izza, ICAEW chief executive, said: ‘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.’

However, McDonnell’s plans for cutting the tax gap by tackling evasion and avoidance were questioned by James Hender, partner and head of private wealth at Saffery Champness, who said there were ‘few concrete commitments in McDonnell’s speech today to suggest how such a gap would be closed’. 

‘It is also unclear how Labour plans to tighten the rules on corporate tax avoidance. McDonnell had a chance to demonstrate that the Labour party was more informed on the tax status quo following Corbyn’s election. However the opportunity to put forward a long-term strategy on tax seems to have been missed,’ Hender said. 

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