The shadow chancellor said the PM’s plan is the ‘worst of all worlds’ which would fail to provide stability for businesses or workers.
And he confirmed Labour would be voting against the deal if a customs union with the EU is not permanent – despite the prospect of a revolt by backbenchers who have said they could back the PM.
Mr McDonnell said Mrs May will come back hailing a deal, but it will be ‘more like Neville Chamberlain’ than Winston Churchill and will ‘disintegrate’ over time.
His jibe is a reference to when Mr Chamberlain signed the Munich Agreement with Hitler in 1938 and then proudly toured the country declaring he had secured ‘peace for our time’.
Within a year Britain and the Allies were at war with Germany after Hitler had marched through much of Europe conquering vast swathes of the continent.
Appearing on BBC’s Newsnight last night, Mr McDonnell said he ‘can’t see’ Labour backing Mrs May’s deal as ‘I think it would be the worst of all worlds’.
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The shadow chancellor (pictured in the Commons last week) said the PM’s plan is the ‘worst of all worlds’ which would fail to provide stability for businesses or workers
He said: ‘What I am worried about is that Theresa May comes back waving a piece of paper, and it won’t be like Winston Churchill, it will be more like Neville Chamberlain, and we will see peace for our time that will then disintegrate over time.
‘I’d rather she just came back and told us – if she can get a deal that protects jobs and the economy we will vote for it.
What is the final issue in the Brexit talks?
Theresa May insists the Brexit deal is 95 per cent done – but the final issue of the Irish border backstop may be the hardest part.
The backstop sets out what will happen to the Irish border if the Brexit transition ends before a final UK-EU trade deal is in place.
Transition is currently due to end in December 2020.
The EU is still insisting that in the absence of a full trade deal, Northern Ireland should stay in the EU customs union while the rest of the UK leaves to ensure the Irish border remains open.
Mrs May has flatly rejected the idea, saying she would not agree to anything that risked splitting the UK.
Instead, the government has mooted a temporary customs union for the whole UK.
There would also probably need to be more regulatory checks between mainland UK and Northern Ireland to protect the single market.
Some already take place, but they could be dramatically stepped up – potentially creating a huge flashpoint with the DUP.
Brussels now appears to be prepared to do a UK-wide backstop in the divorce deal – but insists it must be robust and the UK could not exit it unilaterally.
‘But it can’t be half in half out. It can’t be, we are in this week but next week we might not be, as that is the worst of all worlds.
‘If she can’t deliver we cant vote for it – move to one side and let us do the negotiations.’
His remarks are likely to spark fury as the policy of appeasement of Hitler is widely seen as a shameful episode in the UK’s history and a massive miscalculation of the threat to all of Europe posed by the Nazis.
Mrs May is said to be on the verge of striking a deal in principle with the EU which will create a backstop which keeps Britain in a customs union with the bloc.
This would avoid a hard Irish border – removing the key stumbling block to thrashing out a deal.
But Brexit Secretary Dominic Raab is insisting that Britain must be able to unilaterally pull out of the backstop if it wants to – something Ireland is opposed to.
Mr McDonnell said that Labour will only back a Brexit deal which keeps the UK in a customs union with the EU permanently.
He said: ‘What I am getting from business leaders, trade union leaders and others is that they want permanence, they want stability.
‘And if the Government says well, customs union for a couple of years, or maybe customs union until we decide there won’t be one, well actually that doesn’t give the stability for investment and it doesn’t give the stability for the trade unions either.’
Labour hopes to be able to oust Mrs May from Number Ten and then swoop in to take control of the crunch negotiations.
Mr McDonnell said: ‘All the messages we get back over this whole period is that our European partners desperately want what we want a deal that protects their jobs and economy…..
‘If they recognise that the deal is unacceptable to Parliament I think that opens up a vista for real negotiations.’
But while the Labour leadership say they will not back the deal, Jeremy Corbyn is facing a revolt from many of his backbenchers who say they probably will back a deal done by Mrs May if the alternative is a no deal Brexit.
The PM (pictured at No10 last night) is set to warn ministers that time is running out to strike an agreement with the EU amid bitter wrangling over the Irish border backstop
Labour MP Lisa Nandy said Labour MPs ‘owe it to the country’ to find a way to secure a Brexit deal rather than letting Britain crash out of the Brussels bloc.
The MP for Wigan, said Labour politicians should consider backing the PM’s deal if it protects the economy and saves jobs.
She told the BBC Radio 4 Westminster Hour: ‘All MPs owe it to the country to try and find a way through this and look at whichever deal comes back with an open mind about what is in the best interests of our constituents.’
She added: ‘Having a UK-wide customs arrangement … would be a really big piece of the jigsaw for Labour, and something that we ought to consider.’
It comes as Mrs May is gathering her Cabinet for crunch Brexit talks today as she scrambles to get a divorce deal across the line.
The PM is set to warn ministers that time is running out to strike an agreement with the EU amid bitter wrangling over the Irish border backstop.
Fears have been mounting among Eurosceptics that compromises on the key issue could effectively leave the UK in the customs union indefinitely – giving up many of the benefits of Brexit.
But while Brussels has also made some concessions on a potential review mechanism, it insists that Britain cannot have a unilateral ability to abandon the backstop.
The two sides now have only days left to bridge the remaining gap in order for an EU summit to be called this month that could sign off a divorce agreement.
Mrs May is also expected to remind ministers that they must trigger large scale no-deal contingency plans as early as next week, or risk the UK not being prepared to crash out of the bloc in March.