John McDonnell, the new shadow chancellor, will tell the Labour conference that Britain must always live within its means as he announces that the party will vote in favour of a new fiscal charter proposed by George Osborne.



In a sign of the new Labour leadership’s determination to restore the party’s credibility on the economy, McDonnell has told the Guardian that the party will manage the economy carefully.

“We accept we are going to have to live within our means and we always will do – full stop,” the shadow chancellor said ahead of the Labour conference, which opens in Brighton on Sunday. He added: “We are not deficit deniers.”

To the possible surprise of some on the left, McDonnell will announce that Labour MPs will be expected later this autumn to vote for the chancellor’s fiscal charter unveiled in the budget in July.

It commits the government to delivering an overall surplus by 2019-20 and to running an overall budget surplus in “normal times”. The shadow chancellor said: “We will support the charter. We will support the charter on the basis we are going to want to balance the books, we do want to live within our means and we will tackle the deficit.”

But McDonnell makes clear that he takes a radically different approach to the austerity measures of the Tories, whose deficit reduction plan is achieved mainly through spending cuts, as he says that Labour would ease the burden on low- and middle-income earners.

Labour would also stimulate economic growth by borrowing to invest in infrastructure projects, McDonnell said. “We will tackle the deficit but the dividing line between us and the Tories is how we tackle it. Our basic line is we are not allowing either middle or low earners or those on benefit to have to pay for the crisis. It is as simple as that.”

Jeremy Corbyn, the Labour leader, will also come close to accusing David Cameron of lying during the general election campaign, when the prime minister said he had no plans to cut child tax credits.

Corbyn will highlight the prime minister’s remarks, made in a special general election edition of Question Time on 30 April, when Cameron said that child tax credits had increased by £450 under his government, adding: “That’s not going to fall.” Just over two months later George Osborne announced in the summer budget that tax credits and universal credit will be limited to the first two children from April 2017.

The new Labour leader, who is to launch a campaign highlighting the impact of the government’s cuts to tax credits, said: “This raises fundamental questions of honesty in politics. It is difficult to believe David Cameron did not know that the Tories were planning to make these cuts when he made those comments to the British people during the general election.”

Corbyn will be hoping that his new campaign, in which he will say that cuts to tax credits will have a particular impact on the self-employed, will show to the Labour conference that his office has a renewed sense of direction after a bumpy first two weeks as leader.

In his interview with the Guardian, McDonnell indicates the extent of preparations for the party conference when he makes clear:

• Corbyn is expected to issue an apology for Labour’s role in the Iraq war in 2003. McDonnell and Corbyn both voted against the war but believe the party needs to acknowledge that its leader at the time sanctioned Britain’s involvement.

• The Labour conference should vote this week on whether Britain should renew its Trident nuclear deterrent.

• All Labour MPs, including frontbenchers, could be given a free vote on whether to support extending Britain’s involvement in airstrikes against Islamic State targets from Iraq to Syria on the grounds that votes on armed conflict are a matter of conscience.

McDonnell indicates that his main message to the conference in his speech on Monday will be designed to reassure voters that Labour is committed to tackling the deficit. But he indicates that his support for the charter is qualified because he believes that only the current account should be balanced to give the government space to borrow to fund infrastructure projects.

He says of Osborne’s plans to deliver an overall surplus: “There is an economic illiteracy about this. If you have a surplus in that sense you are actually taking capacity out of the economy.”

McDonnell added: “We will oppose all the tax cuts that the Tories are bringing forward. We will make sure that we look at how we tackle the tax evasion and tax avoidance.”



In a further move to reassure voters who felt Labour could not be trusted on the economy, he is to ask Osborne to open up the Treasury and the Office for Budget Responsibility to run a health check on Labour’s plans. He said: “Everything we put forward as a policy we are going to test and test again rigorously.”

The shadow chancellor, who along with Corbyn, his friend and ally, has a long record of campaigning for unilateral nuclear disarmament, makes clear that it is right that the Labour conference votes on whether to maintain Trident.

McDonnell, who estimates between £80bn to £100bn could be saved by scrapping the programme, said: “I think there should be a debate about Trident at this party conference and if it comes to it I shall be advising people to scrap Trident ... Conference is the sovereign body so when it comes to a decision like Trident I think that it should be taken into account seriously by those that represent the party and that includes the parliamentary Labour party.”

Jeremy Corbyn with John McDonnell in 2001. Photograph: Peter Jordan/PA

He added: “There is going to be discussion and debate. Don’t mistake democracy for division. It’s not. That is the nature of discussion and that it is how it will be from here on in.”

McDonnell said that frontbenchers should be bound by the conference decision on Trident. But he said that MPs should have a free vote on whether to support British military action. “My own personal view – not the shadow cabinet view – is that going to war is such a moral issue it should be on the basis of conscience.” If this were to be instated, it would give Labour MPs a free vote should Cameron ask MPs to back a bombing campaign in Syria.

Holding out the prospect that Corbyn will apologise for the Iraq war, McDonnell said: “I think people expect us to move on and we will not be able to move unless we admit the mistake that was made. I am hoping at this stage people will understand there is contrition on behalf of the party that we ever got into this”. Asked if the apology should come at this conference he agreed the apology needed to be “sooner rather than later”.

He also declined to advocate that Labour councillors refuse to set a budget next year, saying there was little point. In the 80s many leftwing councils refused to set budgets in protest at government cuts, and some leftwing groups are calling for Labour to refuse to set budgets in the face of local government cuts imposed by the Treasury. McDonnell said: “The situation the councils are now in is if they don’t set a budget, a council officer will do it for them. There is no choice for them any more.”

To coincide with the Labour women’s conference, which opens on Saturday, McDonnell said that he is to establish a review to address the discrimination faced by women in the economy.

The shadow chancellor said: “We will be undertaking a major review of the economy from the perspective of women. Women have had to endure the brunt of austerity cuts and we want to bring forward a concrete programme that addresses the impact of austerity and discrimination of women in our economy.”