Shadow chancellor John McDonnell signals budget surplus vote u-turn

Labour MPs are to vote against proposed new rules which would require governments to run a budget surplus every year, in a significant u-turn by shadow chancellor John McDonnell.

Shortly after his appointment by Labour's new leader Jeremy Corbyn, Mr McDonnell surprised Westminster by announcing Labour would back George Osborne's proposals for an updated Charter of Budget Responsibility to enshrine in law his target to achieve a surplus by the end of 2019/20 and to deliver surpluses every following year "in normal times".

The announcement last month was designed to give the lie to Tory claims that Labour were "deficit deniers" but led critics to say Mr McDonnell had fallen into a trap which would limit Labour's scope for reversing austerity cuts and borrowing to invest.

The shadow chancellor has now told a meeting of Labour MPs and peers at Westminster that the party will vote against the charter when it comes before the House of Commons on Wednesday, and will set out its own plan for "tackling the deficit not through punishing the most vulnerable and decimating our public services, but by ending the unfair tax cuts to the wealthy, tackling tax evasion and investing for growth".

The u-turn was denounced by Mr Osborne as "a grave threat to the economic security of working people".

Speaking as MPs gathered for the meeting of the Parliamentary Labour Party, Mr McDonnell said: "As the nature and scale of the cuts Osborne is planning are emerging, there is a growing reaction not just in our communities but even within the Conservative Party.

"The divisions over the cuts in tax credits to working families are just the first example of what we can expect as the cuts in other departments are exposed and the failure to find additional resources to bridge the growing expenditure gap in service areas like the NHS is revealed.

"We will underline our position as an anti-austerity party by voting against the charter on Wednesday.

"Labour will set out our plan for tackling the deficit not through punishing the most vulnerable and decimating our public services, but by ending the unfair tax cuts to the wealthy, tackling tax evasion and investing for growth."

Mr Osborne responded: "Labour's economic policy has lurched from chaos to incredibility.

"Two weeks ago ?they said they were going to vote for a surplus - now we know they want to keep on borrowing forever.

"That would be a grave threat to the economic security of working people?.?"

Scottish National Party leader Nicola Sturgeon challenged Labour at the weekend to join her party in voting against the charter.

Responding to Mr McDonnell's announcement, the SNP's leader in Westminster Angus Robertson, said: "This is promising news but it's disgraceful there has had to be any doubt that the Labour Party would oppose Tory cuts, and it is astonishing that they were ever considering voting for the charter."

Mr Robertson said this week's vote was now a major test for Mr Corbyn, adding: "Every single Labour MP must now join the SNP and vote no to Tory austerity or their credibility will be in ruins.

"However, once again it shows that Labour is a party in chaos, and is deeply divided on the issue of austerity as with so much else."

As he left the PLP meeting, Blairite former cabinet minister Ben Bradshaw declared, within easy earshot of waiting reporters: "Total f**king shambles."

A senior party spokesman was unable to say whether the shadow cabinet had met to discuss or approve the change in policy - or whether Labour MPs would be under a three-line whip to vote against.

Mr McDonnell was "quite clear in the meeting that he had spoken to the shadow cabinet".

He rejected suggestions Mr Bradshaw represented the wider tone of the meeting.

"I don't think it was angry. I really wouldn't say that. There was some discussion about the business this week. I thought generally the meeting was quite positive.

"The only disagreement really was that there needed to be more discussion."