Quick, tangible change will see off the hard right – these are the things Labour must do now | John McDonnell

The relief of getting rid of the Tories can mask the fact that we have entered potentially the most divisive political period for the politics of this country since 20 April 1968. That was the date when the rightwing Conservative minister Enoch Powell made his infamous “rivers of blood” speech railing against immigration.

At the time, hard-right parties had failed to secure parliamentary representation. But Powell’s intervention had the effect of giving permission for racist ideas to permeate the mainstream, including the Conservative party, for the next two decades. Replace Powell’s references to immigrants with Nigel Farage’s attacks on asylum seekers and we’re back to equally divisive demagoguery.

Fourteen years of austerity, economic incompetence and corruption under the Conservatives created the disillusionment and alienation from politics that Farage has been able to feed off. With a change of government, his focus now will be on damaging Labour .

The relief at the Tories’ departure will provide the new government with a honeymoon period but it’s doubtful this will last long. Labour has set out its “first steps” policy programme paid for by tax increases drawing in £7bn. But its fiscal rules, and commitment not to raise income tax, national insurance or VAT, means that any expenditure above that has to come from growth. In terms of the revenue that could raise, a 1% increase in the growth rate brings in about £12.5bn in taxes, according to the Institute for Fiscal Studies (IFS).

There has been some increase in the growth rate, with the Office for Budget Responsibility’s forecast growth of 0.8% for 2024 already exceeded by the 0.9% in the three months to May , but it’s generally accepted that achieving even a 1% increase requires sizeable investment and takes time to deliver.

Labour’s dilemma is that people will be relatively patient, but will want to see some early initial progress on a number of fronts – and significant results by at least the midterm of this government.

Some people have argued that the situation in the US, where President Biden has shown delivering economic success does not automatically win support, demonstrates that storytelling and emotion are the key elements to maintaining political support, but electors can be impatient masters. New polling this week from More in Common shows more than 70% of Labour voters expect things to get better in “the next few years”. Unless there has been a noticeable change in living standards by the end of the government’s second year in office, it will not matter what kind of story it tells. Disillusionment will set in, and Farage will have a field day exploiting it.

To guard against a rise of the hard right here, the left has to secure a wave of progressive policy delivery, and to start soon.

With 14 million people, including 4.3 million children , now living in poverty, an early win in the implementation of the anti-poverty strategy Labour committed to in its manifesto would be secured by the scrapping of the brutal two-child benefit cap, lifting 300,000 children out of poverty. The OBR’s underestimate of the growth prospects gives the chancellor the room to act on this now.

One major reason for the high level of poverty is that the wages of many workers have been effectively frozen since 2008 and there has been a widespread extension of insecure and often precarious work across the economy. Labour’s commitment to introduce its new deal for workers in its first 100 days could transform the lives of people at work, and address the scourge of low pay and insecure employment, but to be effective it has to be comprehensive with no further watering down, and cannot be delayed by endless consultations.

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Trade unions are realistic and will not expect the earth, but in the coming pay round they will rightfully expect a pay rise that starts making up for lost ground and which is set within a strategy to restore the living standards of their members, undermined over the past decade.

People know how much pressure our public services have been put under by Conservative austerity, but will want to see change. They will support reform that puts control into the hands of the frontline professionals, but will react to reform that privatises and enables companies to profiteer, fuelling Farage’s claim of the corporate capture of the Labour party.

Realistically, large-scale investment is needed and the government should be honest and start the pre-budget debate on potential tax reforms, including the equalising of capital gains tax rates with income tax, a review of the largely unregulated corporate welfare system containing more than 1,000 tax reliefs , and reform of stamp duty on share trading.

We are at a defining moment not just for the new Labour government but for the politics of our country. Beware the danger but recognise the potential.

• John McDonnell has been the Labour MP for Hayes and Harlington since 1997. He was shadow chancellor from 2015 to 2020