UPDATED: Labour embarrassed as budget charter passed by Commons

The shadow chancellor urged Labour MPs to oppose the Government’s updated Charter of Budget Responsibility, having previously said they would support the “meaningless” document.

Mr McDonnell told the Commons that he had not changed his mind on the “need to tackle the deficit” but on the “parliamentary tactics”.

The U-turn by Mr McDonnell has drawn significant criticism from Labour moderates, with a number of the party’s MPs thought to have defied a three-line whip to abstain instead of voting to oppose the charter, which was passed by 320 to 258, a majority of 62.

The Labour whips office played down the scale of the revolt, claiming “it looks less than expected” with “under 30 abstentions”.

The charter commits the Government to running an overall budget surplus by 2019 and every year from then on in “normal” times.

Setting out his position in the House, Mr McDonnell acknowledged his embarrassment but added “a bit of humility amongst politicians never goes amiss”.

He said: “When the circumstances and judgments change it is best to admit to it and change as well.”

Mr McDonnell, who was mocked and heckled by Tory MPs, also questioned the true purpose of the fiscal charter.

“It is increasingly clear that the charter and the fiscal mandate are not economic instruments, they are political weapons,” he said.

The debate is not about economics but about the “politics of dismantling the welfare state, the closing down of the role of the state and the redistribution of wealth from the majority to the minority”.

“Austerity is not an economic necessity it is a political choice,” he said.

Labour’s deficit reduction programme would not be wrought “on the backs of middle and lower earners”, would be fairer than Mr Osborne’s approach, and would be on a looser timescale, Mr McDonnell said.

The shadow chancellor also announced a review of the remit of the Bank of England’s Monetary Policy Committee (MPC), which is in charge of setting interest rates and meeting the inflation target, will be led by former MPC member Professor David Blanchflower as part of Labour’s “radical project”.

Ahead of the vote Islwyn MP Chris Evans said he would abstain, saying he could not “in good conscience support a position which I do not agree with”.

“It is my view that Labour should support a budget surplus in principle but ensure that certain tests are passed,” said the Islwyn MP.

“Are the NHS, vital public services and the national security safe? Are the vulnerable and poorest protected? Are we taking the right action to support people fulfil their ambitions?

“Labour should be setting these tests and extracting concessions from the Government. This would be acting as a sensible, mature and responsible opposition and would be an effective start to the fightback. We cannot achieve this with inconsistent policy positions.

“As a result of this I have decided to abstain on today’s vote on the fiscal charter. I cannot in good conscience support a position which I do not agree with, which has been inconsistent with existing Labour policy and which has not been properly explained by the shadow chancellor and Labour leadership.”

More than 30 Labour MPs failed to vote in tonight’s crunch Commons division on the Charter for Budget Responsibility with 21 thought to have defied direct orders.

Some 16 MPs are thought to have been away from the lobbies with permission - but they have not yet been identified by Labour.

The 37 Labour MPs missing from the division were: Rushanara Ali (Bethnal Green & Bow), David Anderson (Blaydon), Ian Austin (Dudley North), Adrian Bailey (West Bromwich West), Kevin Barron (Rother Valley), Ben Bradshaw (Exeter), Karen Buck (Westminster North), Sarah Champion (Rotherham), Vernon Coaker (Gedling), Ann Coffey (Stockport), Rosie Cooper (Lancashire West), John Cryer (Leyton & Wanstead), Simon Danczuk (Rochdale), Thangam Debbonaire (Bristol West), Chris Evans (Islwyn), Frank Field (Birkenhead), Mike Gapes (Ilford South), Yvonne Fovargue (Makerfield), Margaret Hodge (Barking), Tristram Hunt (Stoke-on-Trent Central), Graham Jones (Hyndburn), Helen Jones (Warrington North), Kevan Jones (Durham North), Liz Kendall (Leicester West), David Lammy (Tottenham), Chris Leslie (Nottingham East), Fiona Mactaggart (Slough), Shabana Mahmood (Birmingham Ladywood), Michael Meacher (Oldham West & Royton), Lucy Powell (Manchester Central), Jamie Reed (Copeland), Rachel Reeves (Leeds West), Barry Sheerman (Huddersfield), Angela Smith (Penistone & Stocksbridge), Graham Stringer (Blackley & Broughton), Gisela Stuart (Birmingham Edgbaston) and John Woodcock (Barrow & Furness).