Shadow Chancellor Defends Economic U-Turn

The shadow chancellor has defended his economic policy U-turn which triggered a bitter war of words in the Labour party.

John McDonnell said he had a "change of heart" over backing George Osborne's fiscal charter after a visit to the families of steelworkers in Redcar who have lost their jobs.

He said it made him realise the cuts the Chancellor proposes and the Government's failure to invest in infrastructure would mean that "people actually are going to suffer badly" and he didn't want Labour "associated with this policy".

Mr McDonnell's decision not to back Mr Osborne's plans to return to surplus just 48 hours before a key parliamentary vote prompted a backlash from Labour MPs.

They branded it an "absolute shambles", said they had not been consulted and claimed the party leadership was "not credible".

The shadow chancellor told Sky News he still wanted to reduce the deficit and said: "I haven't changed my mind on that, but I have changed my mind on the parliamentary tactics.

"Originally what I said to people was 'this charter is a political stunt, it is a political trap by George Osborne, it is virtually meaningless, he ignores it himself time and time again, he never meets his targets, so this is just a stunt, let's ridicule it in the debate and vote for it because it's a meaningless vote."

:: Corbyn's Labour: New Politics Or Shambles?

Mr McDonnell's predecessor, Chris Leslie, said the flip flop sent the "wrong message" about Labour's economic policy to the public.

He told the Radio 4 Today programme: "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.

"So, 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 his is clear and consistent and explains fully not just what Labour's position is but why he backed George Osborne's surplus a couple of weeks ago and is now against it apparently."

Just a fortnight ago, ahead of the Labour Party Conference, Mr McDonnell announced to surprise that he would back the fiscal charter - he repeated his commitment in an interview at the weekend.

A number of Labour MPs suggest the change of heart comes after Mr McDonnell's economic advisers suggested he take a harder line after SNP's attack on Labour's anti-austerity credentials and the row over tax credits cuts that overshadowed the Conservative Party Conference.

Mr Osborne said: "Labour's economic policy has lurched from chaos to incredibility".

Labour MP for Ilford South, Mike Gapes, wrote on Twitter: "There is now no collective shadow cabinet responsibility in our party, no clarity on economic policy and no credible leadership."

Corbyn supporters were quick to attack Mr Gapes with calls for his resignation, suggestions he was betraying his party, and was actually a Conservative at heart.

The MP, who has a majority of 20,000, responded with a host of zingers and attracted a number of moderate Labour defenders.

The exchanges expose the deep and growing rift within Labour between Mr Corbyn's Labour Left and the moderates in the party, who fear they are going to be the subject of a purge.

:: Inflation Goes Negative: Lowest Since March 1960

Shadow international development secretary Diane Abbott defended Mr McDonnell and told the Radio 4 Today programme: "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."

SNP economy spokesman Stewart Hosie said: "Labour have found themselves in chaos this morning. They can't even organise themselves to vote against Tory cuts."