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Labour to oppose fiscal charter after U-turn Labour to oppose budget surplus rule after U-turn
(about 4 hours later)
Labour has renounced its support for the government's fiscal charter, in a U-turn performed by the leadership. Labour has withdrawn its support for plans to force future governments to keep a budget surplus, prompting anger among some of its MPs.
Shadow chancellor John McDonnell had said the party would back the plans, which commit future governments to maintaining a budget surplus. Shadow chancellor John McDonnell told MPs they would oppose the chancellor's plan in Wednesday's vote, despite previously saying they would back it.
But he has now said Labour will oppose the charter in a vote on Wednesday, to underline its "anti-austerity" stance. He said it would "underline our position as an anti-austerity party".
Chancellor George Osborne said Labour's policy "was a grave threat to the economic security of working people". The BBC's Eleanor Garnier said some at the meeting of the Parliamentary Labour Party reacted in fury at the decision.
Some at Monday night's meeting also called the situation a "shambles", our correspondent added.
Chancellor George Osborne said Labour's policy was a "grave threat to the economic security of working people".
MPs will debate and vote on Mr Osborne's Charter for Budget Responsibility on Wednesday.MPs will debate and vote on Mr Osborne's Charter for Budget Responsibility on Wednesday.
Mr McDonnell, who signalled the U-turn as MPs gathered for a meeting of the Parliamentary Labour Party on Monday night, said he would propose an "alternative plan" for budget responsibility.
'Not deficit deniers'
The charter would legally prevent future governments from spending more than they receive in tax revenue when the economy is growing.The charter would legally prevent future governments from spending more than they receive in tax revenue when the economy is growing.
The proposal commits the government to keep debt falling as a share of GDP each year and achieve a budget surplus by 2019-20. Governments will then be required to ensure there is a surplus in "normal times" The proposal commits the government to keep debt falling as a share of GDP each year and achieve a budget surplus by 2019-20. Governments will then be required to ensure there is a surplus in "normal times".
At the Labour Party conference in September, Mr McDonnell pledged support for Mr Osborne's plans, saying Labour were not "deficit deniers". Analysis
Analysis: BBC political correspondent Eleanor Garnier By BBC political correspondent Eleanor Garnier
It was a long and difficult meeting of the Parliamentary Labour Party. It was a long and difficult meeting of the Parliamentary Labour Party. One MP said it was the worst they had ever been to.
One MP said it was the worst they had ever been to. Jeremy Corbyn was apparently "read the riot act" and said nothing. Another described it as "shambolic", lacking "any aspect of democratic politics". Jeremy Corbyn was apparently "read the riot act" and said nothing. Another described it as "shambolic", lacking "any aspect of democratic politics".
A former shadow cabinet member told me it was "without doubt one of the most heated" PLPs and that "passions were running high". Others were clearly outraged at the shadow chancellor's change of plan.A former shadow cabinet member told me it was "without doubt one of the most heated" PLPs and that "passions were running high". Others were clearly outraged at the shadow chancellor's change of plan.
As he left the meeting, former cabinet minister Ben Bradshaw branded it a "total shambles".As he left the meeting, former cabinet minister Ben Bradshaw branded it a "total shambles".
John Mann MP was furious, he shouted so loudly at the party's leadership he was easily audible in the corridor outside.John Mann MP was furious, he shouted so loudly at the party's leadership he was easily audible in the corridor outside.
Despite that anger, a spokesman for Mr Corbyn said the meeting had been "warm and friendly" claiming the only disagreement had been on the need for there to be more discussion on the issue.Despite that anger, a spokesman for Mr Corbyn said the meeting had been "warm and friendly" claiming the only disagreement had been on the need for there to be more discussion on the issue.
It all shows the seriousness of the cracks within the party and many in Labour will worry about how much worse it could all get.It all shows the seriousness of the cracks within the party and many in Labour will worry about how much worse it could all get.
He told the Guardian: "We accept we are going to have to live within our means and we always will do - full stop. At the Labour Party conference in September, Mr McDonnell pledged support for Mr Osborne's plans, saying Labour were not "deficit deniers".
"We will support the charter on the basis we are going to want to balance the book, we do want to live within our means and we will tackle the deficit."
'Chaos to incredibility''Chaos to incredibility'
But on Monday, he said there was a "growing reaction" to the "nature and scale" of public spending cuts, which had prompted the change of position.But on Monday, he said there was a "growing reaction" to the "nature and scale" of public spending cuts, which had prompted the change of position.
"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," he added. "We will underline our position as an anti-austerity party by voting against the charter on Wednesday," he said.
Responding to Labour's decision, Mr Osborne said Labour's economic policy had "lurched from chaos to incredibility". "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."
Austerity battle
Mr Osborne said Labour's economic policy had "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," he said."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," he said.
At the weekend, SNP leader and Scottish First Minister Nicola Sturgeon challenged Labour to join her party in voting against the charter.At the weekend, SNP leader and Scottish First Minister Nicola Sturgeon challenged Labour to join her party in voting against the charter.
Welcoming the U-turn, Angus Robertson, SNP leader at Westminster, said it was "promising" but added it was "disgraceful there has had to be any doubt that the Labour Party would oppose Tory cuts".Welcoming the U-turn, Angus Robertson, SNP leader at Westminster, said it was "promising" but added it was "disgraceful there has had to be any doubt that the Labour Party would oppose Tory cuts".
He said the vote would be a major test for Jeremy Corbyn's leadership, claiming Labour's credibility "would be in ruins" unless every one of its MPs voted against the charter.He said the vote would be a major test for Jeremy Corbyn's leadership, claiming Labour's credibility "would be in ruins" unless every one of its MPs voted against the charter.
The independent Office for Budget Responsibility (OBR) will be responsible for policing the new rules, which were first proposed by Mr Osborne in January 2015, and confirmed in his post-election Budget in June. The independent Office for Budget Responsibility would be responsible for policing the new rules.
The OBR is also expected to have the power to decide when the government should be able to spend more than it is taking in revenue, for example, when the country is in a recession. It would also have the power to decide when the government should be able to spend more than it is taking in revenue - for example, when the country is in a recession.