McDonnell Woos Past Enemies for U.K. Labour's Push for Power

(Bloomberg) -- John McDonnell, self-proclaimed enemy of capitalism and the man who would be chancellor of the exchequer, took pride in sowing dissent.

He’s such a serial rebel that he used to produce his own version of the Budget as a rank-and-file lawmaker when the Labour Party was in power. In opposition, he and now-leader Jeremy Corbyn, undermined their bosses by publishing an alternative manifesto on the eve of the 2015 election.

The 66-year-old says he’s a changed man and wants everyone in his “tent.”

Asset managers in charge of multi-billion dollar funds should come and help write the party’s program for government, party opponents should have their say, and his charm offensive in the City of London has seen him sipping tea with the bankers he once pledged to overthrow.

“We’re having the time of our lives,” McDonnell said in an interview after a speech to finance executives on Thursday. “There’s nothing up my sleeve, we’ll be open and transparent, and if you don’t believe us, why don’t you work alongside us?”

Labour is ready for an election if Prime Minister Theresa May should fall and increasingly ready for government, McDonnell does not tire of repeating. The softening of his tone to the City of London is part of the plan. Investors are needed to finance infrastructure and facilitate the re-nationalization of railways and water supplies while paying more in tax to fund public services.

Servants, Masters

“The financial sector need to be servants of our community, not our masters, and they have accepted that,” McDonnell said. “I’d rather they came into the tent with us.”

In return, McDonnell makes the case that companies will benefit from a better Brexit deal than May’s Tories can deliver and a more equitable and fair country for their employees to live in. And government will put its money where its mouth is to encourage backing for economic development.

“We think we can get a deal which will secure their future, both in terms of access for financial services to the rest of Europe, but also in the strength of our economy,” McDonnell said. “We’re not going to get long-term investment from the financial sector if we don’t put it in from the state as well.”

Speculators, Gamblers

Corbyn and McDonnell approach the City in different ways.

The former has denounced bankers as the “speculators and gamblers who crashed our economy in 2008” and warned they will face a reckoning when he gets into office. McDonnell instead has been in constant dialogue with asset managers and other executives, building on contacts from his days as finance chief for the Greater London Council.

“I’ll be contacting lots of companies just to reassure them that there’s a change coming,” he said when asked if they should have anything to fear.

“If they’ve got any anxieties, come and talk to me, or we’ll come and talk to you,” said the man who in his youth had considered the Catholic priesthood before committing to revolutionary politics.

One of those anxieties is over the introduction of what he describes as a “small” financial transaction tax. The CityUK lobby group was clear that it would be a mistake: “We are the world leader in this area but our lead will not last long if we start booting balls into our own net,” Miles Celic, the group’s chief executive officer, said after McDonnell’s speech.

Hard Sell

If some parts of London’s financial services remain a hard sell, McDonnell shares Corbyn’s difficulty in winning over large parts of Labour’s parliamentary party whose votes he will need if he wants to deliver on his socialist pledges.

Most Labour lawmakers never wanted Corbyn in charge and vitriolic abuse meted out on social media by people claiming to support the leadership hasn’t helped to heal the divide.

McDonnell says there are “a maximum of a dozen” who are “just not happy,” but insisted opponents are free to speak out and that the divisions have been exaggerated.

“We don’t want any backlash by party members to individual MPs they disagree with. They have the right to express those views and they’ll be listened to,” he said. “We think we can bring them back on board.”

Anti-Semitism Problem

There is also another problem: the allegations of anti-Semitism the party can’t seem shake off. On Tuesday, Parliament listened in shocked silence as Jewish Labour lawmakers recounted the abuse they have received -- a lot of it from people who said they were supporters of Corbyn and McDonnell.

“It was tragic, heart-rending,” McDonnell said. “If there’s anyone associated with the Labour Party abusing MPs we’ll deal with them ruthlessly,” he added. “One anti-semite in our party is one too many.”

Labour and May’s Conservatives are neck-and-neck in opinion polls and, while an election is not scheduled until 2022, the perilous state of the Brexit process could bring one sooner.

McDonnell says Corbyn has “grown in the job” and is ready for government.

“Normally in opposition you know what you’re dealing with, but we don’t know from hour to hour who’s dealing with the Brexit negotiations,” he said. “We need an election.”

To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net, Robert Hutton in London at rhutton1@bloomberg.net.

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Robert Jameson

©2018 Bloomberg L.P.