SHADOW Chancellor John McDonnell has accused the UK Government of being “in chaos” over its plans for Brexit.

The Labour politician insisted it is the “objectives rather than the structures” of Brexit that are important, as he was challenged on his own party’s policy.

Mr McDonnell was asked to explain Labour’s approach to leaving the European Union during an appearance at the Edinburgh Festival Fringe after an audience member said it was “very unclear as to what the thinking is”.

There has been confusion over the party’s view on European single market and customs union membership as negotiations to leave the EU continue.

Leader Jeremy Corbyn has previously said Britain would leave the single market on Brexit while other leading party figures – such as shadow Brexit Secretary Sir Keir Starmer and Mr McDonnell – have said all options are on the table.

Mr McDonnell said Labour’s priority was “the protection of jobs and the economy”, while there are also “issues around freedom of movement”.

“Therefore we’ve got to negotiate some form of managed migration system, but one in which we don’t cut our nose off to spite our face by undermining our economy,”

he said.

“The issues around what structures, whether we’re in the single market or the customs union or not ... our view is it is the objectives rather than the structures which are important.”

Mr McDonnell, speaking at an In Conversation event chaired by comedian Susan Morrison, also warned the tone of the Brexit negotiations needs to change.

“We’d change the tone – we would get into the negotiations on the basis of mutual respect and mutual interest,” he said.

“We’d look at how we would protect our economy and we’d look at how we’d introduce a fair managed migration system, and that way we think we could overcome many of the dis-benefits of the EU that are perceived and maintain many of the benefits themselves.”

His comments came as lawyers warned that leaving the EU will dilute the rights of companies and individuals to sue the Government.

A “chilling” clause buried in the EU (Withdrawal) Bill ends the right to compensation for serious breaches of Brussels regulations in areas such as air pollution and the environment, it has emerged.

The passage relates to a 1991 European Court of Justice ruling known as Francovich. It states: “There is no right in domestic law on or after exit day to damages in accordance with the rule in Francovich.”

Notes accompanying the bill say the change will not affect people’s right to claim damages under existing British law.

However campaigners say the end of the Francovich ruling, which has been used in the past to challenge the Government, means a significant watering down of existing rights.

Liberty director Martha Spurrier said: “This chilling clause, buried deep in the bill’s small print, would quietly take away one of the British people’s most vital tools for defending their rights. Putting the Government above the law renders our legal protections meaningless.

“It exposes a clear agenda to water down our rights after Brexit.

“We cannot trust a handful of ministers with our hard-won rights and freedoms.

“We need a formal commitment in the repeal bill, in the black and white letter of the law, that the British people will not leave the EU with fewer rights than we have now.”

David Hart, QC, who practises environmental law, said: “This seems to be a blatant way of Government seeking to avoid responsibilities.”

A UK Government spokesman said: “The right to Francovich damages is linked to EU membership – the Government therefore considers this will no longer be relevant after we leave. After exit, under UK law it will still be possible for individuals to receive damages or compensation.”