John McDonnell explains U-turn on fiscal charter - Politics live

Rolling coverage of all the day's political developments as they happen, including reaction to Labour's U-turn over the charter for fiscal responsibility

5.21pm BST

5.00pm BST

Labour's deputy leader, Tom Watson, has been invited to appear before the Home Affairs Select Committee on October 21st.

Labour dep. leader Tom Watson invited to give evidence to Commons Home Affairs Committee re his sex abuse allegations against Leon Brittan

4.51pm BST

In some, er, lighter news - Liberal Democrat blogger Stephen Tall has paid a heavy price for betting on the BBC's Daily Politics show in 2013 that he'd "run naked down Whitehall" if his party was reduced to just 24 MPs in the election.

This is what happens, kids, if you make a daft pledge on TV. You've been warned. http://t.co/r5SWfRmCCT pic.twitter.com/LYn5ob33St

This guy in Whitehall lost bet during election over number Lib Dem MPs would be left - he lost! .@Daily_Politics pic.twitter.com/lpVhQPsGD7

4.15pm BST

MPs have been debating the government's immigration bill in the commons this afternoon. The bill would make renting out accommodation to illegal immigrants a criminal offence. Labour has tabled a wrecking amendment to the bill, with shadow home secretary Andy Burnham warning that it could lead to the modern equivalent of the "no dogs, no blacks, no Irish" signs. Here are some key points so far -

4.01pm BST

From the Daily Mail's deputy political editor -

Did Michael Gove brief Jeremy Corbyn on Saudi deal to help bounce David Cameron into u-turn? Some Tory MPs think so...

3.02pm BST

The Scottish Labour leader, Kezia Dugdale, has been speaking to the BBC, denying that she urged McDonnell to change his position on the fiscal charter.

I didn't warn anyone off. I did speak to Jeremy Corbyn and his team over the weekend about the need to demonstrate that the Labour Party is the only anti-austerity party in the UK, so it is a good move.

2.24pm BST

This is an interesting tweet from the BBC's political editor -

All sorts of reasons why McDonnell U turn on budget surplus not a laughing matter, including that Corbyn himself had no idea it was coming

2.17pm BST

John McDonnell has been speaking to broadcasters this lunchtime, explaining his decision to oppose the government's fiscal charter.

"I've changed my mind on the parliamentary tactics" says John McDonnell of Labour's U-turn on fiscal policy https://t.co/O8DjMHnlOl

I have changed my mind, but I haven't changed my mind on the principles of what the charter is standing for which is we need to tackle the deficit and we will tackle the deficit. Labour will tackle the deficit - we are not deficit deniers, I haven't change my mind on that.

But I have changed my mind on the parliamentary tactics. Originally what I said to people was look that charter is a political stunt, it's a political trap by George Osborne, it is virtually meaningless - he ignores it himself time and time again, he never meets his targets. So [I said], this is just a stunt and let's ridicule it in the debate and vote for it because it's a meaningless vote.

2.12pm BST

The Guardian's home affairs editor Alan Travis has this analysis of the decision to scrap the Saudi prisons deal. The headline is: "Michael Gove emerges as human rights hero over bid to scrap Saudi prisons deal". Here's an extract -

Michael Gove, in his new role as justice secretary and lord chancellor, is rapidly turning into a highly unlikely hero of the liberal left.

The credits had hardly finished rolling on Monday's BBC Panorama, showcasing Gove's summer study tour to Texas to see how they are cutting their burgeoning prison population, before fresh details of his cabinet battle over a Saudi prison contract emerged.

2.05pm BST

The debate is now over, but my colleague - who was in the chamber - said that Conservative MP Daniel Kawczynski was handed a note part-way through (from a whip telling him not to speak in the debate?) which he then slung to the ground shouting "disgraceful".

He is the former chair of the all-party parliamentary group on Saudi Arabia and has strongly-held views on critiques of the country's human rights record. See below.

1.54pm BST

Conservative MP Peter Bone asks how the "difficult balancing act" between human rights and national interest works in practice.

Gove says the UK engages with the Saudi government on every level. The balancing act is guided by Britain's national interest and keeping British citizens safe, but also by promoting the values that the British hold.

1.50pm BST

Kate Higham, caseworker at human rights organization Reprieve, said the decision to drop the prisons bid could not have come soon enough.

This deal, if it had gone ahead, would have meant the UK was complicit in the same system that is threatening to execute juveniles Ali al-Nimr and Dawoud al-Marhoon for the 'crime' of protesting. Britain's alliance with Saudi Arabia, however, remains extremely strong. Cancelling the bid has sent a clear message that the UK does not support Saudi Arabia's gross violations of human rights, and David Cameron must now use this moment of opportunity to prevent the brutal executions of Ali and Dawoud.

1.48pm BST

Labour MP Ann Clywd asks about the training courses the UK College of Policing provides to the Saudi police. "What training is being given and at what price?" she asks.

Gove says that he is not a Foreign Office minister but that he knows from his dealings with the Foreign Office that they put human rights first and foremost.

1.44pm BST

Minister of State for Policing and Criminal Justice, Damian Green says he wants to congratulate Gove for making a decision because "quite simply, it's the right thing to do." He asks whether, when weighing up security considerations and human rights, the consideration of human rights should be "slightly higher in the mix" than it has been under past governments of all colours.

1.35pm BST

The SNP's Stewart McDonald asks Gove about the decision to fly the Union jack at half mast when King Abdullah of Saudi Arabia died in February. Gove says that it is standard practice to fly the flag at half mast when any monarch dies.

Gove repeats, in response to a question from Alan Duncan MP, that a balance needs to be struck between maintaining strong diplomatic relationships while opposing the death penalty and human rights abuses.

1.31pm BST

I can only apologise for any delay in responding to the leader of the opposition on the case of Ali Mohammed al-Nimr, says Michael Gove in response to Slaughter's comments.

It in the interest of the most important human right of all - right to live in security and safety - that the government continues to cooperate with the Saudi government, says Gove.

1.25pm BST

Michael Gove is formally announcing the decision to withdraw the bid for a prison's contract with Saudi Arabia

1.19pm BST

Jeremy Corbyn has issued a statement on Cameron's decision to scrap the Saudi prisons contract:

David Cameron has been shamed into a u-turn on this terrible contract, but why on earth was it set up in the first place? We should be sending a strong message to repressive regimes that the UK is a beacon for human rights and that this contract bid is unacceptable in the 21st century, and would damage Britain's standing in the world.

So to David Cameron I say: Intervene personally with the Saudi Arabian regime to stop the beheading and crucifixion of Ali Mohammed al-Nimr for taking part in a demonstration when just 17 years old.

And start by terminating the Ministry of Justice's bid to provide services to the Saudi prisons service - the very body which would be responsible for carrying out this barbaric sentence.

1.01pm BST

Here is the Guardian's chief political correspondent, Nick Watt, on the cancellation of the Saudi prisons contract.

Downing Street has announced that the government is to cancel a 5.9m contract to provide a training programme for prisons in Saudi Arabia.

In a significant victory for Michael Gove, whose attempts to cancel the project had been resisted by David Cameron and the foreign secretary, Philip Hammond, the prime minister's spokeswoman said the contract has been cancelled after a review.

12.48pm BST

While I'm waiting for more information on the news that Cameron has cancelled the controversial prisons deal with Saudi Arabia, here's a recap of the story. I've taken the points from the article my colleague Nadia Khomami wrote this morning.

12.37pm BST

My colleagues Nick Watt and Patrick Wintour are reporting that David Cameron has decided to cancel the controversial 5.9m prisons deal with Saudi Arabia.

David Cameron has cancelled the Ministry of Justice contract to supply prison services to Saudi Arabia, No 10 reveals.

Victory for Michael Gove. No 10: govt has decided not to go ahead with contract to advise Saudi penal authorities. Riyadh informed 1/2

No 10: @David_Cameron writing today to Saudi authorities to raise 'extremely concerning case' of Karl Andree 2/2

12.24pm BST

Labour MPs John Mann and Emma Reynolds - who was shadow communities secretary before Corbyn's reshuffle - are on the Daily Politics.

Mann says that Labour members discussed Osborne's fiscal charter in July and felt it was a dangerous gimmick. Mann is asked why McDonnell decided to support it in the first instance. "Haven't got a clue," he says.

12.02pm BST

Hello, Frances Perraudin here. I'll be covering for Andrew for the rest of the day.

Stewart Hosie, the deputy leader of the Scottish National Party, has been on the BBC. He said he was "absolutely aghast at the shambles the Labour party are in" and that it was "pretty shallow" for the party to change its position to gain ground on the SNP. "It simply won't wash - people expect consistency from a political party, not this kind of cheap shot," he said.

No one could have been in any doubt from the moment the budget was published in July and the fiscal charter update was published - also in July - that George Osborne was planning to run a surplus in the economy, in this parliament and in the future, cutting far more than he needed to in order to run a balanced economy. The fact it has taken Labour 24 hours before the vote to get to a good place, with all the mayhem that has ensued, is a ridiculous place for them to be in.

11.50am BST

There's an urgent question on the Ministry of Justice Saudi prison contract at about 1.15pm.

UQ granted circa 1.15pm to @hammersmithandy to ask Gove whether he'll withdraw from Saudi penal systems contract pic.twitter.com/6fAI0P0Wrb

11.36am BST

Here's the Guardian audio of Chris Leslie's interview on the Today programme about the fiscal charter U-turn.

11.31am BST

LabourList has published the full text of the letter John McDonnell sent to Labour MPs explaining why he was changing the party's stance on the fiscal charter.

11.27am BST

The shadow cabinet has been meeting this morning. According to Diane Abbott, it went well.

Diane Abbott emerges from Shadow Cabinet to say the mood in the meeting was "very positive".

11.25am BST

John Mann has also set out his critique of John McDonnell in an article for PoliticsHome, in which he also modestly claims that "it has been the consistent stubbornness of me and others that has saved the day."

11.14am BST

John Mann, the Labour MP, told BBC News a few minutes ago that the fiscal charter U-turn had left John McDonnell looking "a bit of a fool". Mann said it was clear to him all along that the fiscal charter did not make sense economically, and that it was just a political trap, and he did not understand why McDonnell originally said he would back it. He also criticised the way McDonnell first announced he would back it, and then announced he would not, without proper consultation.

I don't understand why [McDonnell] was backing George Osborne's austerity lock-in through legislation. It's quite peculiar. One thing Jeremy Corbyn was elected on more than anything was let's do more about tackling austerity, and that seems to resonate very popularly. And yet McDonnell was backing Osborne's lock-in which would have worsened things for everybody ...

Let's have proper debate and discussion. This is not the way to do business. John McDonnell looks a bit of a fool because of that. But the policy, and the way that we will vote on Wednesday, is the right way, not falling into George Osborne's trap.

I hope Jeremy will reign in John McDonnell. McDonnell's other policy is more quantitative easing which is a policy that has come from straight monetarism, a chap called Milton Friedman from Chicago, the most rightwing of economist who created the policy. It's been a George Osborne policy. I hope Jeremy will rein in John McDonnell and get rid of that policy because that will have a very detrimental effect on pensions, including mine workers, teachers, local government workers in my area and across the country.

10.50am BST

Tom Watson, the Labour deputy leader, was doorstepped as he left home this morning and asked about Labour's fiscal charter U-turn. Asked if he was happy about it, he said: "Yes, absolutely." Asked why John McDonnell changed his mind, he replied:

He's a very wise and judicious shadow chancellor.

10.42am BST

Karim Palant, who was head of policy for Ed Balls when Balls was shadow chancellor, has written an article for Comment is Free saying that Labour is right to be opposing the charter for budget responsibility, and that John McDonnell should never have said he would back it in the first place. Palant suggests McDonnell only did this because he misunderstood what it actually said.

Here's an extract.

The last charter in January was for a current, not absolute surplus, and it had no specific date attached, so Labour was able to vote for it.

This current charter enacts a fiscal policy far tougher than that contained in Labour's 2015 manifesto. Voting for it was not consistent with a slowing of fiscal consolidation ....

A shadow chancellor's fiscal stance is fundamental to credibility and trust. This kind of chaos less than a month into the job is the kind of blow even significant political figures struggle to recover from.

10.12am BST

Here is the final text of the government's 20-page charter for budget responsibility (pdf) that Labour MPs will vote against tomorrow following John McDonnell's U-turn.

And here is a blog by Richard Murphy, the tax campaigner whose ideas are being picked up by Jeremy Corbyn, explaining why he thinks the charter (which commits the government to running a budget surplus in normal times) is a mistake. Here's an extract.

Saving takes money out of circulation in our economy: it effectively destroys it. That is because money is only created be lending and since saving is the opposite of lending ( loan repayment having the same net effect as saving in economic terms) than a worldwide glut of savings leaves a shortage of something that we all need, which is money. UK money supply has fallen since the end of the quantitative easing programme in 2012. If this shortfall is to be made good then the only party capable of delivering the money we need to keep the economy going when the private sector insists, overall, on saving is the government and the only way in which it can create this new money is by running a deficit. This is the role of quantitative easing when the economy gets really tight: I would of course prefer people's quantitative easing to any other form because this does, of course, direct the funds to productive investment for all the positive reasons noted in the previous section.

9.49am BST

Here's the Labour MP Mike Gapes on the state of the Labour party today.

There is now no collective Shadow cabinet responsibility in our Party, no clarity on economic policy and no credible leadership. @BBCr4today

9.43am BST

My colleague Graeme Wearden has more on the inflation figures on his business live blog.

9.41am BST

George Osborne, the chancellor, has welcomed the inflation figures.

Inflation at -0.1% while wages rising at fastest rate in over a decade is a real boost for budgets of working families

We shouldn't mistake this for damaging deflation: we remain vigilant and our system is designed to deal with such risks

9.40am BST

Inflation has gone negative, according to figures just out today.

9.35am BST

On Twitter this morning the Labour MP John Mann says that John McDonnell decided to execute his fiscal charter U-turn partly because he learnt that Mann and other Labour MPs were determined to vote against it.

Whips discovered on Sunday that I and others were voting against Osborne's austerity charter. That is why McDonnell did his U-turn.

Labour Treasury Cttee members took Osborne's budget charter apart in July. All were voting against it. And still are.

9.30am BST

Last night's PLP meeting seems to have been remarkable. Here is a round-up of the best and most colourful accounts around this morning.

After a short speech by Jeremy Corbyn, shadow chancellor John McDonnell sought to explain his decision to oppose Osborne's fiscal charter (having supported it just two weeks ago). He cited the change in global economic conditions and the refusal to allow Labour to table an amendment. McDonnell also vowed to assist colleagues in Scotland in challenging the SNP anti-austerity claims. But MPs were left unimpressed. "I don't think I've ever heard a weaker round of applause at the PLP than the one John McDonnell just got," one told me. MPs believe that McDonnell's U-turn was due to his failure to realise that the fiscal charter mandated an absolute budget surplus (leaving no room to borrow to invest), rather than merely a current budget surplus. "A huge joke" was how a furious John Mann described it. He and others were outraged by the lack of consultation over the move. "At 1:45pm he [McDonnell] said he was considering our position and would consult with the PLP and the shadow cabinet," one MP told me. "Then he announces it before 6pm PLP and tomorow's shadow cabinet."

The U-turn sparked furious scenes at the weekly meeting of the Parliamentary Labour Party in the Commons which one long-serving MP said afterwards was 'the worst PLP meeting I have ever attended', including the dark days of Iraq when the party was deeply split.

Angry shouting could be heard as Mr McDonnell outlined his thinking to MPs behind closed doors.

"It was absolutely mental," one senior Labour MP reflected when Guido asked how Monday night's PLP meeting went. "It was feral," reveals a second backbencher: "Shambolic". A relative newcomer comments: "People who have been around for a lot longer said it was the worst PLP meeting they have ever been to." This is what happened at this extraordinary meeting of Labour MPs, told by the people in the room ...

Moderate MP Ian Austin "stood up and said Jeremy should start acting like the Leader of the Opposition and not like a student union president", reports a colleague. Grimsby MP Melanie Onn launched a thinly-veiled attack on Diane Abbott over her "online trolling": "She didn't name Diane but everyone knew who she meant". Emily Thornberry angrily told off her fellow MPs for texting journalists details of what was being said.

John Mann, the MP for Bassetlaw, led the attack over the apparent change of stance on a key economic policy. Describing the U-turn as a "huge joke", he accused the leadership of "shambolic politics" and making a decision that "does not have any aspect of democratic politics". Leaving early, Ben Bradshaw, the former culture secretary, described it as a "total f***ing shambles".

Ben Bradshaw left the meeting early, reportedly describing the scene as a "total f*cking shambles", while inside John Mann had described the move as a "huge joke". Former Shadow Chancellor Chris Leslie also criticised the decision, and appeared on this morning's Today programme to advocate Labour MPs abstaining from the vote.

Corbyn blasted at PLP on fiscal rules, privy council, trolling front benchers, fixing NEC seats, Syria & Momentum. Otherwise routine.

Texts from MPs about the PLP meeting tonight are X-rated. Bloody hell

9.10am BST

Diane Abbott, the shadow international development secretary and an ally of Jeremy Corbyn, told the Today programme this morning that the U-turn row was "a process story" and that most Labour MPs now supported the policy.

We are in the right position now, it is a position that most of the PLP is comfortable with and, I think, all party members. John McDonnell takes the deficit very seriously and the party as a whole takes the deficit very seriously.

Some people in the party are only slowly coming to terms with the fact that Jeremy won. Once they have come to terms with that, they will be happy.

Watch John Humphrys press @HackneyAbbott on Labour's budget surplus vote U-turn: http://t.co/5zNbvnDJHc

9.01am BST

Jeremy Corbyn, the new Labour leader, has already had a series of uncomfortable policy disputes with MPs and shadow ministers - over Europe, the benefits cap, and Trident, for example - but today he is embroiled in what could be the biggest row yet. Yesterday John McDonnell, the shadow chancellor and Corbyn's close ally, announced that he was abandoning the stance he took just last month and that he was now committing Labour to voting against the government's charter for budget responsibility. At last night's meeting of the parliamentary Labour party (PLP) there was a mighty backlash, leading to it being described as shambolic.

Parliamentary Labour Party meeting described by one MP - not a Blairite - as one of the worst he has ever seen - "an incompetent shambles".

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 ...

I can't explain why John went in favour of supporting and voting for George Osborne's strategy. I personally think it would have been better to say, in principle, we support the concept of a surplus but if certain conditions, certain tests are passed. For example, can we be certain that the viability of public services - our NHS, our national security - would be safe.