The free movement of people around the European Union will end with Brexit, John McDonnell has said as he outlined an economic blueprint for Labour to prepare the nation for departure.  The shadow chancellor, and key ally of Jeremy Corbyn, also said the party leader was likely to face a leadership challenge in the next few days. Answering questions after a speech in London, McDonnell said Corbyn would contest any challenge to his leadership, and that rebel MPs who had quit the shadow frontbench in their dozens this week should unite if the current leader was re-elected.  This was vital if Labour was to present a coherent plan on how Britain’s exit from the EU might look, McDonnell argued.  There was, he said, no point in seeking to argue against the outcome of last week’s referendum. “The people have spoken and their decision must be respected,” he said. “We know that the population voted to leave the European Union, but we now need to work to decide which elements of our European relationship we want to preserve, and which must be changed.”  Asked how this might change Labour’s policy on immigration, which is seen as having lost the party votes in former heartland areas, McDonnell said: “Let’s be absolutely clear on the immigration issue. If Britain leaves the European Union, the free movement of people, of labour, will then come to an end.”  In the interim, McDonnell said, Labour needed to “consult with the British people on the nature of the relationship we have with regard to the free movement of people”.  “There will be a range of options which people will then have the opportunity to debate. The problem with a referendum is that it’s a binary choice. We have to respect the decision of it, but now we have to explore the details of those implications and allow the people in this country to participate in the debate about what sort of relationship we want with the European Union. That includes the issue of immigration itself.”  McDonnell did, however, argue that while many voters voted to leave the EU because of the impact of immigration, he believed many of them had instead suffered because of the Tory government’s austerity policy. He called for massive government investment in “shovel-ready” projects to shore up the economy.  In a tweet to the Guardian after his speech, McDonnell stressed that he was talking about the “formal reality as it stands – not talking about Labour’s position on free movement”.  @peterwalker99 I was stating the formal reality as it stands - not talking about Labour's position on free movement  In the speech, McDonnell outlined a series of red lines for the party over its economic vision for a future outside the EU, membership of which he said had been good for workers on balance. This included access to the EU’s single market in goods and services, which some senior EU politicians have warned cannot happen without free movement of workers.  It was also vital for employment that UK financial institutions kept their “passporting” status, which allows them unrestricted trade within the EU. Acknowledging he had previously been a critic of this sector, McDonnell said: “While there is a need for fundamental reform for the City, neither should we just allow it to sink beneath the waves.”  Labour would seek to ensure that any EU national currently living and working in the UK would not lose any rights after Britain left the union, with the same happening for British nationals based elsewhere in the bloc.  He condemned “heartbreaking” reports of abuse and attacks targeting foreign nationals since the referendum, saying Labour would “stand in solidarity” with those affected.  While any deal which did not protect Labour’s main priorities would “have severe consequences for jobs and protection at work”, McDonnell indicated that, even then, the party would not try to block departure from the EU. “We have to respect the decision that was made in the referendum,” he said. “Otherwise we undermine all confidence in our democratic process.”  Asked about Labour’s internal conflict, which saw Corbyn lose a confidence vote among his MPs by a large margin on Tuesday, paving the way for a likely leadership challenge, McDonnell noted that the Conservatives were also engaged in strife.  “The internal difficulties in both parties will be resolved, hopefully, by democratic means, and on that basis, amicably, the Labour party will come back together.”  He said Corbyn would definitely stand again for the leadership, and he expected rebel MPs to be quiet if he then won a renewed mandate from members.  “I’m saying to all Labour MPs now, whatever your views now, calm down,” McDonnell said. “If there is to be a Labour leadership election, let’s do that in a comradely, amicable fashion, argue the points of difference on policy and then come together and unite behind the democratic decision of our members.”
As leadership row goes on, shadow chancellor says Labour will respect vote and consult public about UK-EU future