Labour will oppose Osborne’s fiscal charter setting budget surplus into law

Shadow Cabinet Minister Diane Abbot has defended Labour’s volte-face on whether to support Chancellor George Osborne’s fiscal charter which seeks to force future government to run a budget surplus – effectively embedding austerity into law.

Shadow Chancellor John McDonnell has come under fire from some Labour MPs after announcing the sudden switch in policy a meeting of the Parliamentary Labour Party (PLP) at Westminster on Monday, having recently said the party would vote in favor.

In a letter to Labour MPs on Monday evening, McDonnell said there is a “growing reaction” to spending cuts since his initial decision, adding the U-turn would “underline our position as an anti-austerity party.”

Labour MPs are said to have reacted angrily to the announcement, with former cabinet minister Ben Bradshaw declaring the meeting had been a “total f***ing shambles.”

Speaking to BBC Radio 4’s Today program, Abbot defended McDonnell’s volte-face as a “process story.”

“John McDonnell takes the deficit very seriously and the party as a whole takes the deficit very seriously,” she said.

The Shadow International Development Secretary said the focus would be on Osborne in 12 months’ time.

“The economy is not going to be in as good a place as it is now in a year’s time. People will be focusing on his mismanagement of the economy.”

Abbot played down accounts of the meeting which some MPs described as a “huge joke.”

“At any given time there were will be a group of MPs in Parliament, of whatever party, who are unhappy.

“I suspect my colleagues, on reflection, will calm down and devote their energies to attacking Osborne and his mismanagement of the economy.”

“Some people in the party are only slowly coming to terms with the fact that Jeremy [Corbyn] won [the Labour leadership]. Once they have come to terms with that, they will be happy,” she added.

Speaking to RT's Afshin Rattansi, in an interview for Going Underground aired on Wednesday, economist Michael Burke called the legislation “ridiculous.”

“It’s a ridiculous piece of legislation, although unamendable, which commits future governments to run budget surpluses in normal times. I would be surprised if you could get a tiny handful of economists around the world, who think that’s a good idea. The overwhelming majority of economists know that you should borrow to invest, that’s how you grow the economy.”

The volte face was backed by economist Jonathan Portes, who tweeted in support of McDonnell’s decision to oppose a mandatory budget surplus.

“The government’s Fiscal Charter/budget surplus target: neither necessary, coherent nor credible,” wrote the Senior Fellow at the National Institute of Economic and Social Research.

McDonnell justified his sudden change by pointing to the public’s “growing reaction” to the “nature and scale” of spending cuts which the Conservatives seek to implement.

“We will underline our position as an anti-austerity party by voting against the charter on Wednesday,” he said.

“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.”

The move is likely to be a response to pressure from the Scottish National Party (SNP), which plans to vote against the charter.

Scottish First Minister Nicola Sturgeon issued a challenge over the weekend to Labour to join her party in opposing the bill.

Former Shadow Chancellor Chris Leslie criticized the volte face, saying it was important McDonnell explains his reasons for the change.

“To go from one extreme to the other is wrong in economic terms but also it sends the wrong message to the general public as well,” he told BBC Radio 4's Today program.

“I think to be fair to John McDonnell this is a very difficult balancing act, it’s a very difficult topic, but it’s incredibly important that he is clear and consistent and explains fully not just what Labour’s position is but also why he backed George Osborne’s surplus a couple of weeks ago and is now against it apparently.”