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Labour facing rebellion over opposition to government budget rules Labour facing rebellion over opposition to government budget rules
(35 minutes later)
The Labour leadership is trying to contain a rebellion among MPs over its opposition to government spending rules - with a Commons vote being seen as a test of Jeremy Corbyn's authority. The Labour leadership is trying to contain a rebellion among its MPs over opposition to government spending rules - ahead of a Commons vote being seen as a test of Jeremy Corbyn's authority.
Labour says it will vote against the Charter for Budget Responsibility, requiring governments "in normal times" to spend less than they get in tax.Labour says it will vote against the Charter for Budget Responsibility, requiring governments "in normal times" to spend less than they get in tax.
The opposition originally said it would back the charter but changed its mind.The opposition originally said it would back the charter but changed its mind.
It is thought up to 30 MPs could defy the leadership by abstaining. Shadow chancellor John McDonnell admitted the U-turn was "embarrassing".
The BBC's assistant political editor Norman Smith said the actual number of rebels was likely to be lower than 30, but said it was an "important moment" for Jeremy Corbyn in terms of his ability to impose his authority on the party and turn Labour into an unashamed opponent of austerity. While insisting that tackling the deficit was "vitally important", he told MPs that the charter was a "puerile political stunt" and "an instrument for imposing austerity on our community unnecessarily".
The BBC's assistant political editor Norman Smith said up 30 Labour MPs could potentially defy the leadership by abstaining in a vote at 21:00 BST, saying the outcome would be an "important moment" for Jeremy Corbyn as he tried to impose his authority on the party and turn Labour into an unashamed opponent of austerity.
The SNP and Lib Dems have also said they will vote against the fiscal charter, details of which were set out in July's Budget, but it is still expected to be approved by MPs.The SNP and Lib Dems have also said they will vote against the fiscal charter, details of which were set out in July's Budget, but it is still expected to be approved by MPs.
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.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, shadow chancellor John 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 Parliamentary tactics, not economic policy, and pledged to draw up Labour's own charter to create a "new economic paradigm". 'A bit of humility'
Explaining his decision in the Commons, he admitted the U-turn was politically "embarrassing" but insisted a "bit of humility among politicians does not go amiss".
However, he insisted he had changed his mind on Parliamentary tactics, not economic policy, and that by voting against what he said was a "puerile political stunt", Labour would "disassociate itself" from a plan that was merely cover for spending cuts and an "assault" on the welfare state.
What's George Osborne proposing?What's George Osborne proposing?
Speaking on Wednesday, 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 discussed. The proposed rules were not "economic instruments but political weapons", he said, claiming that Mr Osborne had treated his existing budgetary framework "with contempt" and was unlikely to adhere to them.
Opening the debate in the Commons, Chancellor George Osborne said the UK must "live within its means" and help equip the UK economy to withstand future economic shocks, arguing that if the UK could not manage to get control of its deficit and debt by 2019, after nine years of successive growth, when would it be able to do this. "When the circumstances and judgement change, it is best to admit to it and change as well," he said, adding that he had been influenced by "professional advice" he had received, a change in the economic outlook and the plight of the Redcar steelworkers.
"I want to break the stranglehold that the focus on deficits has had on the economic debate in this country in recent years. Yes the deficit is vitally important but we need a paradigm shift to open up the wider debate about what makes a health economy."
But Mr Osborne said the UK must "live within its means" and help equip the UK economy to withstand future economic shocks, arguing that if the UK could not manage to get control of its deficit and debt by 2019, after nine years of successive growth, when would it be able to do this.
He accused Labour of being "profligate" and wanting "to spend money we don't have and borrow for ever".He accused Labour of being "profligate" and wanting "to spend money we don't have and borrow for ever".
"It is not a political gimmick to have sound public finances," he said. "I tell you what is a political gimmick - coming out on the eve of your conference with some policy suggesting you support what we are doing and two weeks later turning up in the House of Commons and voting against it"."It is not a political gimmick to have sound public finances," he said. "I tell you what is a political gimmick - coming out on the eve of your conference with some policy suggesting you support what we are doing and two weeks later turning up in the House of Commons and voting against it".
Former shadow chancellor Chris Leslie, one of those Labour MPs who has said he will abstain, told MPs that the party "should not set its face" against a surplus but said the proposal would not give Mr Osborne sufficient room for manoeuvre in the event of a downturn.Former shadow chancellor Chris Leslie, one of those Labour MPs who has said he will abstain, told MPs that the party "should not set its face" against a surplus but said the proposal would not give Mr Osborne sufficient room for manoeuvre in the event of a downturn.
The UK has run a budget surplus in only 12 years since 1948.The UK has run a budget surplus in only 12 years since 1948.
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.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.
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".