'Absolute Shambles': Labour's Fiscal U-Turn
Shadow Chancellor John McDonnell has decided to U-turn on Labour's approach to fiscal policy, just a fortnight after surprisingly stating that Labour would back George Osborne's fiscal charter.
Mr McDonnell told his MPs on Monday night that Labour should vote against Mr Osborne's plan for a budget surplus at a parliamentary vote on Wednesday.
Some Labour MPs described the reversal as an "absolute shambles".
"We will underline our position as an anti-austerity party by voting against the charter on Wednesday," said Mr McDonnell.
"And 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."
Yet just a fortnight ago Mr McDonnell defended backing the fiscal charter to Sky News at the Labour Party conference .
"What we are trying to do is completely change the narrative to close down the issue about deficit denial and then move on to a much wider open debate in our society, so you’ll see that in the speech," he said last month.
He added: "It (Other OTC: ITGL - news) 's exactly what we said (in the leadership campaign). What we're going to do is make sure we can manage our economy, tackle the deficit without austerity.
"That's what we are saying. That's the dividing line between us and the Tories."
Mr McDonnell justified the change by referring to a worsening condition of emerging economies and the fact that Mr Osborne's charter would restrict spending on capital investment.
Labour MPs felt the problem lay more in the SNP's attack on Labour's anti-austerity credentials, and Mr McDonnell's economic advisers suggesting a harder line.
The Labour Party hope to capitalise on Conservative announced cuts to tax credits for working families.
Mr Osborne said: "Labour's economic policy has lurched from chaos to incredibility".
Sceptical Labour MPs played down the chances of a large rebellion against its leadership on this issue.