More than any other stance, it was Jeremy Corbyn's opposition to austerity that won him the Labour leadership. After their anger at Ed Miliband's refusal to reject spending cuts, activists embraced Corbyn's red-blooded alternative. Having initially accepted George Osborne's fiscal charter, committing the goverrnment to acheiving a budget surplus by 2019/20, shadow chancellor John McDonnell has since been clear in his rejection of austerity.

In the last parliament, Miliband and Ed Balls disappointed many on the left by opposing most of the government's cuts before conceding that they would be unable to reverse them if elected. A report in yesterday's Observer suggested that McDonnell would avoid following this path. The shadow chancellor was reported to be planning a "fiscal credibility rule" that would "guarantee that all cuts announced for this parliament could be reversed in full".

The Conservatives have been quick to pounce, declaring that Labour's policy would mean "£2,000 more debt and taxes for every working household in Britain" as they "scramble to find £33.5bn to fund their spending splurge." But a senior Labour source emphasised that nothing had been concluded. "We are looking at numerous options, one version of which could give us enough fiscal space to offer the policy option of reversing the cuts," the source told me. "However, we are a long way from even having these discussions about what we would do with that fiscal space. And who knows in 2019/20 what the state of the economy will be."

While keen to shed its profligate image (to the unhappiness of some shadow cabinet members, McDonnell has introduced a veto on spending commitments), Labour is increasingly confident in its rejection of Osborne's surplus rule. The IFS has warned that the Chancellor may have to impose further austerity to achieve his target, while the Treasury select committee has said that the policy is not "credible in its current form" and that it "provides no flexibility to respond to changing economic circumstances". A senior Labour source said: "Most mainstream macroeconomists agree with us that austerity is not a sensible policy option." Last week, the UK's borrowing costs fell to their lowest level since records began in the 17th century (1.3 per cent), strengthening the case for investment .

But while Labour's stance does not lack intellectual support, it is the public it will have to convince. Even if voters are sympathetic to anti-austerity (as some polls suggest), the party's challenge is to persuade them not only that it wants to end cuts but that it has the capability to do so.