McDonnell: Labour will cover Brexit cash shortfall

Labour will commit itself to a multi-billion pound pledge to make up any shortfalls in funding for deprived regions and communities resulting from Britain's departure from the European Union.

Shadow Chancellor of the Exchequer John McDonnell visits Make Liverpool, an open access business unit that allows small start up companies to rent space and use equipment to help their businesses grow. Picture: PA
Shadow Chancellor of the Exchequer John McDonnell visits Make Liverpool, an open access business unit that allows small start up companies to rent space and use equipment to help their businesses grow. Picture: PA

The promise, to be announced on Monday at the party’s annual conference in Liverpool by shadow foreign secretary Emily Thornberry, guarantees that future Labour governments will match EU structural funding currently worth 10.8 billion euros (£9.3 billion) from 2014 to 2020.

With the backing of shadow chancellor John McDonnell, Ms Thornberry will announce plans for a fully protected fund to substitute for the lost EU schemes into the future.

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The fund will be a “central plank” of Labour’s manifesto for the next general election and will be the party’s top priority for any savings achieved from EU withdrawal - money which Leave campaigners including Foreign Secretary Boris Johnson suggested during the referendum campaign should be spent on the NHS.

Regions likely to benefit most from the scheme would be Wales, which is allocated 2.4 billion euros (£2.1bn) under the current seven-year programme, the South West, which is due to receive 1.5bn euros (£1.3bn) and the North West, with an allocation of 1.13bn euros (£979m).

Meanwhile, Mr McDonnell will promise Labour will offer an “interventionist government” prepared to protect key British businesses from global market pressures.

The shadow chancellor will use his keynote speech to herald a post-Brexit “manufacturing renaissance” backed by a comprehensive industrial strategy under Labour.

Chancellor Philip Hammond announced in August that the Treasury would guarantee to back EU structural and investment funding projects signed before this year’s Autumn Statement, in a move which could cost up to £6 billion a year up to 2020.

But Ms Thornberry will say: “For the period after, they have said nothing. That is not good enough.

“Without long-term certainty over funding, our most deprived regions and communities cannot plan ahead. They cannot attract other investment. They cannot make progress.

“So thanks to John McDonnell, Labour’s shadow chancellor, we can guarantee that a future Labour government will make up any shortfall in structural funding into the 2020s and beyond. And the same will go for the funding of peace and reconciliation projects in Northern Ireland.

“The communities who stand to lose out most from Brexit must be looked after first.”

Labour will also commit itself to opposing any government attempts to scrap legal rights and funding programmes derived from Britain’s membership of the EU.

And he will accuse the Conservative government of undermining UK industry’s potential by cutting scientific research spending and subsidies to renewable energy as well as planning to reduce investment in infrastructure like housing and transport.

Mr McDonnell will tell the conference that the rules of globalisation “are being rewritten for us”, with governments around the world moving away from reliance on free markets in favour of intervention.

He will cite the crisis caused by China flooding world markets with cheap steel, when the UK was slow to follow other major governments in taking action to protect its home-grown steel sector.

The shadow chancellor will accuse Tories of being “too blinkered by their ideology” to recognise that “the winds of globalisation are blowing in a different direction. They are blowing against the belief in the free market, and in favour of intervention.”

He will call for “a new deal across our whole economy”, promising: “Be certain the next Labour government will be an interventionist government.

“We will not stand by like this one has and see our key industries flounder and our future prosperity put at risk ... When we return to government we will implement a comprehensive industrial strategy.”

Britain is well placed to take advantage of developments in digital technology which allow companies to site manufacturing facilities close to skilled workforces and potential markets, rather than in the part of the world able to offer the cheapest labour, the shadow chancellor will argue.

This meant that the tide of factory closures as firms shifted work overseas is now turning, with one in six manufacturers in Britain now bringing jobs back to Britain.

Mr McDonnell will say: “After Brexit, we want to see a renaissance in British manufacturing. ... Our government will create an entrepreneurial state that works with the wealth creators, the workers and the entrepreneurs to create the products and the markets that will secure our long-term prosperity.”

Current allocations of structural funding under the EU’s 2014-20 scheme are:

:: East of England 387m euros (£335m)

:: East Midlands 598m euros (£517m)

:: London 762m euros (£659m)

:: North East 739m euros (£639m)

:: North West 1,132m euros (£979m)

:: South East 286m euros (£247m)

:: South West 1,495m euros (£1,293m)

:: West Midlands 909m euros (£786m)

:: Yorkshire and Humber 794m euros (£687m)

:: Scotland 895m euros (£774m)

:: Northern Ireland 613m euros (£530m)

:: Wales 2,413m euros (£2,088m)