Labour would not set aside cash for 'no deal' Brexit, says John McDonnell

Shadow Chancellor reveals plans for £17 billion each year to fund struggling public services as part of calls for an 'emergency budget'

Shadow Chancellor John McDonnell at Labour's 2017 annual conference (Pete Maclaine / i-Images)

Labour has sought to distance themselves from the Government over Brexit by refusing to set money aside to prepare for leaving the European Union without a deal.

Shadow chancellor John McDonnell said it would be a "waste of resources" to pour money into Brexit preparations as Labour would secure a good deal with the EU, if in power.

The comments are likely to anger Brexiteers, who have heaped pressure on Chancellor Philip Hammond to strengthen the Government's negotiating hand, by making it clear Britain was prepared to walk away without a deal.

The Government has already committed £500 million for Brexit preparations, with more than £250 million additional funding for 2017/18, however this is not exclusively for a 'no deal' scenario.

Pressed on the issue at a pre-Budget speech in London, Mr McDonnell said: “We believe we should negotiate a deal and we believe that as a Government, Labour can negotiate a deal that is acceptable for both ourselves and our European partners.

"To actually threaten no deal is an ambition for some of the Cabinet, obviously, to turn Britain into a tax haven off the shores of continental Europe and some of them have that objective.

"We are trying to explain to them and others is what that means is our manufacturing base will be undermined and confidence in our economy would be threatened. We believe that a good deal is essential."

Mr McDonnell also revealed Labour would spend an extra £17 billion per year on crisis-hit public services as he outlined his plans for an "emergency budget".

The party's top demands include pausing the controversial Universal Credit rollout and scrapping the pay cap for all public sector workers, as well as launching a major housebuilding programme.

Calling for a "genuine and decisive change of course, he said: “In his first year as Chancellor, Philip Hammond has demonstrated that he completely fails to understand how working people are struggling after seven years of Tory austerity.

“Next week the country needs an ‘emergency Budget’ for our public services that are in crisis, not a budget desperately designed to save the jobs of a weak Prime Minister and her embattled Chancellor."

In the wake of the Paradise Papers scandal, Mr McDonnell also promised to clamp down on use of tax havens which he claimed were costing the UK £16bn each year.

He added: "Even as they have been cutting public services to the bone, they have been offering huge giveaways to the mega-rich and giant corporations.

"Tax cuts introduced for both since 2010, including corporation tax and capital gains tax, will cost us over £70 billion over the next five years. Every single penny lost in these tax cuts means less money for our public services."

Mr Hammond is facing pressure from all sides to deliver a make-or-break Budget as Theresa May struggles to regain control in the face of Brexit divisions, Cabinet resignations and the sexual harassment scandal at Westminster.