Deficit-reduction plan risks UK health and security, says John McDonnell

John McDonnell, the shadow chancellor, has accused George Osborne of putting Britain’s health and security at risk with politically motivated deficit reduction plans that have left the economy in chaos.

Speaking ahead of the 2015 spending review and autumn statement, McDonnell said the key to eliminating the budget deficit was to boost growth through higher investment rather than by reducing tax credits or by cutting the number of police patrolling the streets.

McDonnell said he would use his response to the chancellor’s set-piece statement to point out that in 2010 Osborne pledged to have balanced the books and to have reduced the national debt to below 70% of GDP.

“Osborne has been there five years. He has no one else to blame. There are no more excuses. You can’t trust him on the economy any more,” he said.

“The fear I have is that politics are overriding economics. He has poor economic judgment, full stop. We are back into a stop-go period for the economy. One reason companies won’t invest is that they are worried about the future.”

McDonnell added: “The long-term economic plan is in chaos. Everything Osborne is doing is to dig himself out of a hole. The cuts are hurting people badly across every service area from health to policing. The public’s health and security won’t be safe. The failure to invest puts the future at risk.”

Predicting that Osborne would announce the privatisation of air traffic control in order to find some extra cash: “He has sold off the family silver. Now he is selling off the furniture.”

McDonnell’s approach marks a change in Labour’s strategy on the economic from the so-called “austerity lite” pursued by the opposition in the last parliament. The opposition’s chief economic spokesman said he expected to be branded a “deficit denier” by Osborne but rejected the charge. “Austerity is a political choice not an economic necessity and will transform our communities.

“We will balance the books. We will tackle the deficit but we will do it fairly. The difference between our approach and that of the government is epitomised by tax credits being cut at the same time as inheritance tax is being reduced for the richest 6%.”

The autumn statement and spending review marks Osborne’s third big set-piece package of measures of 2015 following the March and July budgets, but they will be the first big test of McDonnell, who admitted that six months ago he never envisaged himself in his current role.

Labour will use the occasion to set out an alternative to the government’s austerity, which McDonnell said could be summed up in three words: “investment, investment, investment”. He said a strengthened Department for Business, Innovation and Skills should be used to boost spending on infrastructure and skills.

The shadow chancellor said the Organisation for Economic Cooperation and Development, a Paris-based thinktank, had recommended that its rich-country members should spend 3.5% of national output on public investment. “The UK currently spends 1.6% of GDP and this will fall to 1.4% by the end of the parliament. We will fall behind as an economy.”

McDonnell said Osborne has only managed to mobilise £1bn of the £20bn from pension funds for investment in infrastructure, and only 9% of the key projects identified by the government had been completed, even though corporations were sitting on £400bn worth of earned income. “The reason they are not investing is because there is not enough demand in the economy.”

He added that Labour backed the increased security services spending that Osborne will announce on Wednesday, but said: “Security begins on the streets, with the police on the beat.”

The chancellor has said austerity measures are needed because there can be no national security without economic security. But with the Home Office in line for deep cuts in its budget, McDonnell said: “They are offering security but in reality they are increasing risk.”

McDonnell said that even with the front-loading of spending, the pressure on the NHS this winter will be the “worst it has ever been”.

The shadow chancellor said Osborne would try to dig himself out of a hole on tax credits by putting the burden on other groups through reductions in housing benefit or employment support allowance. “There is a lot of smoke and mirrors. People will still feel the burden of the cuts and many of them will be the most vulnerable.”

He added: “The cuts are putting people’s livelihoods at risk. The lack of investment is putting the long-term future of the economy at risk.”