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George Osborne urges Labour rebellion on fiscal charter vote John McDonnell dismisses George Osborne 'stunt' over budget charter
(35 minutes later)
Chancellor George Osborne is urging "moderate" Labour MPs to rebel against their leadership and support his plan to balance the economy in a vote later. Shadow chancellor John McDonnell says George Osborne's call to Labour MPs to back his fiscal charter in defiance of their leadership is a "stunt".
His appeal follows a fallout within Labour after shadow chancellor John McDonnell said the party would no longer support the proposal. Mr McDonnell acknowledged he "most probably" had confused his MPs after a U-turn on the Tories' policy but he said the position would be made clear.
The fiscal charter would force future governments to run a budget surplus. The Charter for Budget Responsibility says "in normal times" governments should spend less than they get in tax.
Mr McDonnell said he would propose his own charter, but Mr Osborne said Labour MPs should vote with the government. Labour says it will oppose the move when MPs vote on it this evening.
At the very least, Labour MPs should abstain in the vote, the chancellor added. Mr McDonnell said his party's approach, and the thinking behind the U-turn, would be made clear in the Commons when the charter - which his party calls a "gimmick" - is debated.
'New economic paradigm' "We have had to change position on a couple of issues but we will clarify everything," he added.
A motion seeking approval for the Charter for Budget Responsibility will be put before the House of Commons later on Wednesday. On Mr Osborne urging "moderate" Labour MPs to back his plans, Mr McDonnell said: "I don't think anyone will rise to it they'll see it for what it's worth - just as another stunt," adding that he was focused on a "serious economic debate".
'Economic cruelty'
BBC political editor Laura Kuenssberg said the vote was a "big test" for Labour leader Jeremy Corbyn, with a three-line whip imposed on MPs.BBC political editor Laura Kuenssberg said the vote was a "big test" for Labour leader Jeremy Corbyn, with a three-line whip imposed on MPs.
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 force future governments to run a budget surplus - which involves spending less than they receive in tax revenue - when the economy is growing.
Having previously said Labour would give it its backing, Mr McDonnell informed a stormy meeting of Labour MPs on Monday that he had changed his mind - and told the party to oppose it.Having previously said Labour would give it its backing, Mr McDonnell informed a stormy meeting of Labour MPs on Monday that he had changed his mind - and told the party to oppose it.
Explaining his decision the following day, he insisted he had changed his mind on tactics not economic policy, and pledged to start a "new economic paradigm". Explaining his decision the following day, he insisted he had changed his mind on Parliamentary tactics, not economic policy, and pledged to draw up Labour's own charter to create a "new economic paradigm".
Austerity battleAusterity battle
Mr Osborne said Labour's U-turn "confirmed they want to go on borrowing forever - loading debts onto our children that they can never hope to repay".Mr Osborne said Labour's U-turn "confirmed they want to go on borrowing forever - loading debts onto our children that they can never hope to repay".
"This is not socialist compassion - it's economic cruelty," he warned, claiming that "unsustainable deficits" hurt the poorest in society most."This is not socialist compassion - it's economic cruelty," he warned, claiming that "unsustainable deficits" hurt the poorest in society most.
He said the new fiscal rule would commit governments to "acting responsibly" and keeping the public finances in surplus "during normal economic times".He said the new fiscal rule would commit governments to "acting responsibly" and keeping the public finances in surplus "during normal economic times".
"So today, 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." He said Labour MPs should at least follow the advice of the former shadow chancellor Chris Leslie and abstain from the vote.
'What's the point?' The UK has run a budget surplus in 12 years since 1948.
He said failing that they should at least follow the advice of the former shadow chancellor Chris Leslie and abstain from the vote. Critics have dismissed the charter as a "gimmick" that will either bind the hands of future governments or have so may exemptions to be pointless - and Mr Osborne himself described similar legislation introduced by former Prime Minister Gordon Brown as "vacuous and irrelevant" in 2010.
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".
Critics have dismissed it as a "gimmick" that will either bind the hands of future governments or have so may exemptions to be pointless - and Mr Osborne himself described similar legislation introduced by former Prime Minister Gordon Brown as "vacuous and irrelevant" in 2010.
Stephanie Flanders, of JP Morgan Asset Management, told BBC Radio 4's Today programme if the charter constrained a government's ability to respond to a downturn, "it goes from being silly to downright counterproductive".Stephanie Flanders, of JP Morgan Asset Management, told BBC Radio 4's Today programme if the charter constrained a government's ability to respond to a downturn, "it goes from being silly to downright counterproductive".
She added: "If it's not going to constrain behaviour, what's the point of it?"She added: "If it's not going to constrain behaviour, what's the point of it?"
Financial Secretary to the Treasury David Gauke defended the policy, saying it would increase the transparency and accountability of the government's economic plans.Financial Secretary to the Treasury David Gauke defended the policy, saying it would increase the transparency and accountability of the government's economic plans.
"We have to ensure that will build up that buffer, that we bring debt down," he added."We have to ensure that will build up that buffer, that we bring debt down," he added.