In his Labour party conference speech, John McDonnell, Labour's Shadow Chancellor, assured the audience that he would not allow the government to frame the Labour Party as deficit deniers. With this in mind, he made it clear that he would go along with George Osborne's charter on fiscal responsibility, a measure that commits the government to a budget surplus within three years.
But now, McDonnell has changed his mind. The Charter is being put to the Commons tomorrow and he is not going to vote for it. In a statement issued this morning, McDonnell said:
“As the nature and scale of the cuts Osborne is planning are emerging there is a growing reaction not just in our communities but even within the Conservative Party. The divisions over the cuts in tax credits to working families are just the first example of what we can expect.”
“We will underline our position as an anti-austerity party by voting against the charter on Wednesday.”
This has led to a chorus of squawking from Labour MPs, who see in McDonnell's U-turn a dunderheaded decision to march straight into the elephant trap that George Osborne has set so unsubtly before him. As opposed to expunging the charge of “deficit denier” from the Labour party's fiscal rap sheet, McDonnell now plans to stamp it there indelibly. The reaction in Westminster has been a mixture of uproar and derision, from MPs and journalists alike.
New, exclusive YouGov/Prospect polling, to be published in full this Thursday, suggests that this derision might be misplaced. In choosing to oppose Osborne's fiscal charter, Labour may be more in tune with popular sentiment than is currently understood.
Our polling, published in Prospect's November issue, finds that Osborne has not won the fiscal debate as fully as he might assume and that several of Labour's economic policies have a clear and in some cases very substantial approval rating among voters.
In some cases, the polling revealed startling levels of popular support for Labour policies, for example the idea of capping rents in the private sector. Our YouGov/Prospect polls found that 74 per cent of people supported this idea, while only 17 per cent are opposed. There are other similarly arresting poll findings, which will be published in full by Prospect on Thursday.
What this suggests is that McDonnell's withdrawal of support for the government's Fiscal Charter may make more sense that the yowling Labour backbenches appreciate. Osborne has made cuts—but much deeper cuts are to come, says McDonnell. In this, he is correct.
There is an opportunity now for the Labour party to reshape the economic debate to its advantage, by making clear that the British economy is no longer in the grip of economic crisis. The austerity medicine may have made sense back in 2008 and 2009, but that moment is now past. Growth has returned, employment is rising and inflation remains low. The crisis is gone. So why, McDonnell and Labour may well ask, is the government sticking with crisis economic measures?
For all Labour's terrible current frailties—and there are many—and despite the Government's brimming confidence, George Osborne's economic policy is not without its weaknesses. McDonnell's decision to confront austerity head on may well make this clear to his struggling and disorientated party. Despite everything, Labour has the chance to put some strong arguments to the electorate. By rescinding his support for the Government's fiscal Charter, McDonnell may now be in a better position to do so.
