How Labour went to war with itself over the economy

The weekly Monday evening meetings of the parliamentary Labour party are normally routine events in which the party leadership rallies the troops, sets out the whip for the week and allows the usual malcontents and obsessives to air their grievances. Monday night’s meeting, according to some of those who attended, was one of the most fractious ever held. A well of anger that has been building up since before the party conference was unleashed.

The initial cause was an email sent to Labour MPs by the shadow chancellor, John McDonnell, saying he was to reverse his two-week-old policy of accepting George Osborne’s fiscal charter. He had announced that he would accept the charter in a Guardian interview on the Saturday before the party conference, and had confided to shadow cabinet members beforehand. His stance had been surprising, but it was assumed that McDonnell felt his anti-austerity credentials were so strong, he needed to show the new leadership was committed to bringing down the deficit, so long as there was room for investment.

The interview was not that long, but at the time it seemed possible that McDonnell, barely a week into the job, had not read Osborne’s revised charter that closely. For instance, he said the charter did not define in any meaningful way what “normal times” meant – the period when a government, according to Osborne, would be required to run a budget surplus. His interviewers pointed out that there was in fact a clear definition in the charter, but the point was glossed over.

Just after lunchtime on Monday, members of the shadow cabinet received phone calls saying McDonnell had changed his mind due to the downturn in the world economy and would now be urging fellow Labour MPs at the parliamentary party meeting that evening to reject the charter.

A lengthy email was then dispatched setting out the reasons for the U-turn. There was no attempt to say he had been misquoted and no attempt to simply admit he had made an initial political misjudgment.

Instead, he argued, economic circumstances had changed in the past two weeks due to the decline in the position of emerging markets. He added he had not been allowed to amend the charter.

A lot of Labour MPs found this explanation somewhere between specious and incredible. Many have found themselves in a dilemma since Jeremy Corbyn’s election as Labour leader. They feel the Corbyn–McDonnell leadership is not simply amateurish, but sinister and unelectable. They also know the party membership, especially the new membership, do not yet share that view, and quite possibly never will.

But that the party’s economic policy was abandoned within two weeks of its declaration has left them furious, especially since many do not believe there is any evidence that voters would have trusted Labour more in the 2015 election if it had proposed more borrowing.

So the McDonnell U-turn became a catalyst for the anger inside the parliamentary party at Corbyn’s leadership.

It did not take much earwigging for reporters outside the meeting to hear much of what was being said on the other wide of the wooden door, including McDonnell’s ill-received explanation for his volte face. As reporters tweeted what they had heard, Emily Thornberry loudly complained, erroneously, that MPs were disloyally messaging reporters with quotes.

Chris Leslie – a mild-mannered, but increasingly steely centrist who acted as shadow chancellor during Harriet Harman’s interim leadership – led the criticism of McDonnell.

Leslie told MPs there were finely balanced arguments on either side of how to vote on the charter, but McDonnell had lost credibility by advancing both sides of that argument in the space of two weeks. He said if the leadership argued it was changing its mind because of developments in world economic circumstances in the past fortnight – when there had been no such developments – then it would not be surprising if people were cynical about leadership claims that they were offering straight-talking politics. He said it was possible for Labour to have constructed some tests on the charter, and come to a centrist position. Instead the party had lurched from one extreme position to another.

John Mann, the Labour MP for Bassetlaw, predicted McDonnell would be shredded by both the Tories and the SNP if he went into the Commons chamber voting for the charter. He described McDonnell’s stance as a joke.

At this point the arguments spread to other issues. Ian Austin, once an aide to Gordon Brown and now MP for Dudley North, said it was time Corbyn started acting like a leader of the opposition and not like a student union president. The leader was also told to stop prevaricating over joining the Privy Council.

Grimsby MP Melanie Onn launched a thinly veiled attack on Diane Abbott over her online criticism of Jo Cox, the MP who is trying to advance a new strategy for Labour on Syria featuring safe havens to protect civilians from President Assad. Onn said it was bad enough being constantly attacked online by the public, but it was a new low when this was coming from fellow members of the frontbench.

Mary Creagh, the former international development secretary, then challenged Corbyn to explain why he and the leadership were supporting a new social movement being run by his backers called Momentum. Creagh has already voiced fears this represents a “party within a party”. Richard Burgon, one of Corbyn’s more loyal followers, offered a lengthy defence, saying Momentum was intended to do no more than the Fabian Society or Progress. One MP said: “He went on for ages and no one believed him. It’s a Jeremy entryist movement. We are not naive.”

Birmingham Yardley MP Jess Phillips, demanded that the party debate Syria rather than simply be ordered to vote against action, a point she had raised in a Huffington Post blog.

Tom Blenkinsop, the MP for Middlesbrough South who is desperately fighting to keep the Redcar steelworks alive, then asked why the steel union Community had been voted off the National Executive in favour of the leftwing Bakers, Food and Allied Workers Union.

Emma Reynolds, the former shadow Europe minister, asked why the shadow foreign secretary, Hilary Benn, had been ejected from the NEC in favour of a Corbyn loyalist, Rebecca Long Bailey, the MP for Salford and Eccles. Angela Smith, the MP for Stocksbridge, questioned why Corbyn’s hand-picked parliamentary aide was still on the NEC when he had initially been elected to represent the parliamentary Labour party.

So it went on.

Although Corbyn’s press aides claimed the meeting had been positive, one MP rang the Guardian to describe it as “a complete and utter shambles and the worst meeting I have ever seen for the party leadership. The problem is that Jeremy has never met anyone in his life that disagrees with him and he runs away from any discussion or political argument; he is completely unsuited to being a party leader.”

All this may well be dismissed as process, as Abbott did in a sometimes-haphazard BBC Radio 4 Today interview on Tuesday morning. It is also true that McDonnell, given his personal politics, may belatedly have arrived at the right place in rejecting the charter, but the route to this position has been unnecessarily painful.

Karim Palant, Ed Balls’s former head of policy, writing in the Guardian, raises the prospect that McDonnell had not read the revised charter, including its restrictions on borrowing for investment.

Either way, he concludes: “The result is that he has been forced to backtrack on the first major decision he has ever taken.

“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.”