Labour in crisis over tax U-turn: John McDonnell throws party into chaos at 'car crash' PLP meeting

Shadow chancellor John McDonnell announced that Labour would reject the government's proposed fiscal charter (Source: Getty)

Firebrand shadow chancellor John McDonnell threw the Labour party into further turmoil last night with another screeching policy U-turn, announcing that his party would reject the government’s “fiscal charter” less than one month after saying he planned to support it.

The move sparked outrage at a late-night meeting of the Parliamentary Lab­our Party (PLP), with McDonnell and Jeremy Corbyn confronted by fuming backbenchers demanding an explanation for the rapid policy switch.

A Labour source called the meeting a “total car crash”, telling City A.M. McDonnell was “eaten alive” for his “terrible political management”. Exeter MP and former minister Ben Bradshaw reportedly left saying the event was a “total ****ing shambles”.

Referring to the heated exchange of views among Labour MPs, one shadow minister is reported to have said: “I’ve never seen anything like it.” A separate Labour source told City A.M. last night: “It was the most insane PLP meeting for 30 years.”

McDonnell defended his last-minute decision by saying that there was a “growing reaction” against the government’s proposed spending cuts and vowing to “underline” Labour’s position as an anti-austerity party by voting against the fiscal charter in the House of Commons tomorrow.

But chancellor George Osborne wasted no time in slamming his counterpart. He said: “Labour’s economic policy has 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.”

Read more: John McDonnell is right, the Bank of England needs a new mandate

The charter for budget responsibility, which was first introduced in parliament over the summer, will require the government to balance its books within three years. From then on, all governments will have to run an overall budget surplus unless the country veers from “normal” conditions.

Despite calling it a “gimmick”, former shadow chancellor Ed Balls backed the bill – and last month McDonnell said that the party would “vote in favour of the Tories’ fiscal charter” while taking a radically different approach on cutting the deficit.

But last night McDonnell sought to explain his new stance. “We will underline our position as an anti-austerity party by voting against the charter,” he said. “And 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 row is the latest in a series of testing issues for Labour’s leadership after the election of Corbyn one month ago.

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