A Labour government would turn the department for business into an economic development ministry to directly invest in the economy, the shadow chancellor has said.
John McDonnell said the economic investment functions of the Treasury should be moved to the Department for Business, Innovation and Skill and that the resulting ministry would become a beefed-up Department for Economic Development.
“I’m looking to have an institutional review of a whole range of organisations to see whether they’re fit for purpose and how they could be improved. That includes the Treasury itself,” he told LBC Radio on 28 September.
“What we should be doing is looking at another department which develops the economy. I’d like to see the current business department turned into an economic development department … let’s have a department that actually drives economic growth and investment.”
Mr McDonnell said the Treasury should be left to solely focus on monetary and fiscal policy alongside the Bank of England, and making sure the public finances were sound.
Business investment has been historically low in recent years, and the move appears to be an attempt by Labour to address this. The low rate of investment has also been blamed for the UK’s low productivity growth.
The shadow chancellor’s move comes after the appointment of a new party economic advisory committee.
The committee includes “rock star” economists such as inequality theorist Thomas Piketty and Nobel prize-winning former chair of the US President’s economic advisory committee Joseph Stiglitz.
One key appointment is Mariana Mazzucato, a Sussex University academic who advocates the state taking more hands-on role in investing and promoting industry and enterprise.
She has called for an “entrepreneurial state” that helps create markets and investment opportunities for firms by promoting long-term research and development.
The approach proposed by Mr McDonnell has echoes of Harold Wilson’s creation of a Department for Economic Affairs to promote investment alongside a new Ministry of Technology.
Mr McDonnell said that Mr Wilson’s attempt had not been successful but that the idea was still sound.
“Harold Wilson tried it and it failed and I think it failed because of the appointments he made but not because of the institution itself,” he said.
At the time of the appointment of the shadow business secretary Angela Eagle Labour had hinted that the business department would take a bigger role under a Corbyn-led government that it had done previously.