Labour's McDonnell promises nationalisation under a minority government

By Andrew MacAskill and William James

LONDON (Reuters) - Britain's Labour Party cautioned smaller parties not to stop it implementing its radical manifesto, including nationalisation, if it forms a minority government after Thursday's election, telling opponents they would get "shredded" if they do.

Britain votes on Thursday in an election which will decide the fate of Brexit and the world's fifth-largest economy with a stark choice between Prime Minister Boris Johnson's pro-market Conservatives and the socialist-led opposition Labour Party.

Johnson is forecast to win a majority at the election, but he could yet fall short of the 320 to 326 seats he needs.

If Johnson fails, Labour could get a shot at forming a government propped up by smaller parties.

"If we are a minority government we'll implement our programme," John McDonnell, the party's second most powerful man behind leader Jeremy Corbyn, told Reuters.

"I just warn the other political parties, we'll implement a programme that has overwhelming popular support. If they want to press for a second election, we're happy to have that."

Labour wants to hold a second referendum on Brexit next year after negotiating a new exit deal.

McDonnell predicted Labour will form the next government even though they are behind in every opinion poll. He said polling companies were making the same mistakes they did at a 2017 election, when Labour outperformed expectations and deprived the Conservatives of a majority.

"People need to wake up to the subterranean move that is happening now where people don't trust this prime minister, see the Conservative manifesto is one without any hope whatsoever and are looking for real change, and that's what we're providing," he said.

RADICAL PLANS

Labour is proposing a radical shift in Britain's economy.

It wants more public spending paid for by higher taxes on companies and the wealthy, hundreds of billions of pounds of infrastructure investment funded through borrowing, and a large-scale programme of nationalisation.

"It does sound radical," McDonnell said. "It sounds more radical in the UK than in other countries because we've been held back by this neo-liberal thinking for so long, particularly the 10 years of austerity which narrowed people's horizons."

Even if it falls short of a majority, McDonnell said Labour would set out its manifesto plans - including nationalisation, public sector pay increases and investment in services - in a Queen's Speech and budget shortly after taking office.

He dared other parties to vote against them - a move which would force another national election.

"If parties want to vote against those, well we'll go back to the people and I think those parties would be shredded," he said.

Financial markets have rallied on the prospect of Johnson winning a majority at the election, with some investors worried about the scale of Labour's economic transformation and preferring the certainty around Brexit offered by the Conservatives.

McDonnell says he has not done any preparations for a run on the pound because Labour have a clear policy for resolving Brexit and investing in the economy over the next decade.

In 2017 McDonnell said he was preparing for potentially turbulent transition into government, including a run on the pound. However, one Labour official said the plans were abandoned amid concerns the details would leak.

Asked repeatedly on Monday if there would be a run on the pound he said: “No. There will be no run on the pound. The pound will rise.”

(Reporting by William James and Andrew MacAskill; editing by Guy Faulconbridge)