John McDonnell dismisses plea to Labour 'rebels' as George Osborne 'stunt'

John McDonnell has dismissed the prospect of a Labour revolt over economic policy, but conceded his dramatic U-turn may have "confused" the party's MPs.

New leader Jeremy Corbyn is facing the biggest test of his authority so far, with Labour moderates refusing to say whether they will obey the party whips in a crunch Commons vote on the Government's updated Charter of Budget Responsibility.

But as he left his home, the shadow chancellor denied the policy was in "chaos" and dismissed the Chancellor's appeal to disgruntled Labour MPs to rebel.

"Oh that's an Osborne stunt, isn't it really? I don't think anyone will rise to it. They'll see it for what it's worth: just another stunt," he told a BBC reporter.

"We are trying to get on to serious economic debate today, not those sort of stunts any more."

Asked if the late shift in stance had confused MPs, he conceded: "Most probably, yes.

"We have had to change position on a couple of issues but today we'll clarify everything."

Following a stormy meeting of the Parliamentary Labour Party (PLP), MPs angrily complained that their economic policy was in disarray and the party had "no credible leadership".

Mr McDonnell had said just two weeks ago they would vote for the charter, which he dismissed as a "stunt" and a "trap" by Chancellor George Osborne designed to enable the Conservatives to paint Labour as "deficit deniers".

But at Monday's gathering of the PLP at Westminster, Mr McDonnell stunned MPs by saying they should now vote against the charter, which requires governments to run budget surpluses in "normal times" when the economy is in good shape.

The announcement was greeted with open derision by some MPs while even among those who had been unhappy at the prospect of voting for the charter, there was anger at the way the abrupt about-turn had been handled.

It raises the prospect that a significant number of MPs could defy a three-line whip and abstain in tonight's vote in what may be the first significant rebellion of Mr Corbyn's leadership.

A senior Labour economic adviser said Mr McDonnell had eventually settled on the right policy but conceded it had "taken some time" and been "messy".

Former Bank of England monetary policy committee member Danny Blanchflower, one of a number of well-known economists appointed to the Opposition's economic advisory committee, said the panel would always, if consulted, have recommended voting against the Government.

Mr Osborne proposed "silly rules that have no obvious economic benefit and which inevitably have to be broken", he said - saying there was a case for a "large amount" of economic stimulus.

Former shadow chancellor Chris Leslie and former shadow business secretary Chuka Umunna were among those who expressed unhappiness at the situation in which they found themselves.

Mr Osborne was quick to exploit the Labour leaders' discomfort saying the party had shown it wanted "to go on borrowing forever", loading debts onto future generations which they could never hope to repay.

"This is not socialist compassion - it's economic cruelty," he said.

"With Labour's economic policy in obvious chaos, I call on all moderate, progressive Labour MPs to defy their leadership and join with us to vote for economic sanity.

"Failing that, they should at least follow the advice of the former shadow chancellor: abstain."