John McDonnell calls for 'economic development councils' to return to UK

The Continental-style bodies were scrapped more than 20 years ago in Britain by John Major

James Callaghan, second from left, chairs his first ‘Neddy’ meeting in 1976 (Getty)

John McDonnell has called for Continental-style “economic development councils” to be resurrected in the UK – more than 20 years after they were scrapped by John Major.

The Labour shadow Chancellor said he would set up a “National Prosperity Council” in government, which would bring together trade unions, big business and government officials to decide economic policies. This, he said, would stop economic decisions being taken solely by the Chancellor.

Mr McDonnell’s aides added that it would also help reassure business leaders that they will have a seat at the table under Labour and mirrored similar programmes in the United States and Germany.

The proposed new body is modelled on the old National Economic Development Council – dubbed “Neddy” – which influenced government policies on trade and industry in the 1960s and 70s.

The council, whose members consisted of trade union general secretaries, academics, civil servants and ministers, was famous for its high-powered meetings where economic policy was formulated behind closed doors. Critics will almost certainly argue that it marks a return to 1970s-style corporatism and a “beer and sandwich” culture of decision-making.

But writing exclusively for The Independent on Sunday, Mr McDonnell said the new body would stop economic decisions being taken for short-term political gain.

Attacking George Osborne’s “austerity obsession”, which he claimed was holding down economic growth, Mr McDonnell said Labour was “determined to take a different path”.

He said there was no doubt the Chancellor would “prescribe another hefty dose of his austerity medicine” in Wednesday’s Autumn Statement.

But he claimed the Chancellor’s “infatuation with narrow dogma and temporary fixes” was “placing ... the UK economy in jeopardy”.

Mr McDonnell called for a new economic strategy which would target investment in certain industries, with the backing of business, trade unions and wider civil society.

He said: “The state has a strategic role to play in ensuring the huge technological changes ahead work for the benefit at all.” He also praised Finland’s economic transformation and promised “the next Labour government would learn from [Finland], orchestrating the response of the public and private sectors in a collaborative effort to diversify and innovate”.

Mr McDonnell announced: “We will look to establish a National Prosperity Council, reconnecting the top levels of decision-making with workplaces and communities.”

He said: “The Chancellor’s short-term obsession to close the fiscal deficit today is creating a deficit with the future. This is one that the next generation will struggle to close if our economy is not properly equipped today.

Mr McDonnell’s announcement comes after the weakest October public finance figures for six years left Mr Osborne’s deficit reduction plan for this year £10bn off course.