John McDonnell claims pound would rise under a Labour government

Posted On: 
14th July 2019

Labour's economic plans would boost the value of the pound, John McDonnell has claimed.

John McDonnell has dismissed criticism of his ecomonic plans

The Shadow Chancellor said suggestions that his party's economic agenda would cause a crash in sterling were “ludicrous” as he sought to calm fears of a market shock if his party were to win the next election.

Speaking to the Sunday Times, the Labour finance chief said markets would “react appropriately” to Labour's plans, which include a tax hike for the highest earners, nationalisation of most rail, power and water networks, and boosting workers' stakes in their firms.

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And he dismissed warnings that the pound could be devalued to the level of the US dollar or that strict withdrawal limits would be required to prevent a run on the banks under a Labour government.

“What we’re setting out is a stable, long-term plan of investment - £500bn over a 10-year programme,” he said.

“I think what we’ll see is sterling strengthening, if anything, as a result of the plans we’ve laid out. We know what our programme will be.

"The market will know well in advance and will react appropriately, and it won’t be on the basis of capital flight or anything like that.”

Mr McDonnell raised eyebrows in 2017 when the hold Labour's conference to be ready for an "assault" from the establishment if it took office.

"What if there is a run on the pound?" he said. "What happens if there is this concept of capital flight? I don’t think there will be but you never know - so we’ve got to scenario-plan."

Jeremy Corbyn ally Jon Lansman meanwhile told the BBC last year that Labour could face a run on the pound if it took power at an election.

The Momentum founder said: "Other governments have faced challenges like runs on the pound and we may face similar things. I hope we don’t. The people who are opposed to what we want to do have one thing in their favour - money. We have people."

But the Shadow Chancellor told The Sunday Times that conversations with “altruistic” business chiefs had convinced him that Labour's plans would not trigger panic in the financial markets.

“When I meet people in the City and elsewhere, extremely rich people, they say to me when they come out of their offices they don’t want to be stepping over homeless people,” he said.

“Most people are altruistic. They want to make their contribution.”