George Osborne urges 'moderate' Labour MPs to defy Jeremy Corbyn and back key Government economic policy

Chancellor appeals to Labour MPs after shadow chancellor's dramatic U-turn on the Government's proposal to bind future governments to running a surplus

George Osborne urges Labour MPs to back him in key Commons vote on Wednesday (BBC)

George Osborne has reached out to moderate Labour MPs urging them to defy Jeremy Corbyn’s leadership and vote for economic “sanity” by backing legislation that will bind future governments to balancing the nation’s books.

MPs are set to vote on his proposed fiscal charter today, which shadow chancellor John McDonnell said Labour would support until he performed a dramatic U-turn on Monday evening, triggering an angry backlash from many of his colleagues.

The charter would enshrine in law the requirement for the Government to balance the books by 2018/19 and then run a budget surplus in “normal times”.

Mr McDonnell has ordered Labour MPs to oppose the move by imposing a three-line whip but Mr Osborne has called on “moderate, progressive Labour MPs to defy their leadership and join with us to vote for economic sanity”.

He said at the very least they should follow former shadow chancellor Chris Leslie’s advice and abstain on the key vote in the House of Commons today, describing the current Labour leadership’s economic approach as “not socialist compassion [but] “economic cruelty”.

Mr Osborne added: "A fortnight ago, Labour told voters they were ready to back our plans.

"But now, they have confirmed they want to go on borrowing forever - loading debts onto our children that they can never hope to repay.”

The vote signals a big test on Mr Corbyn's authority, after a meeting of the Parliamentary party on Monday evening ended in acrimony. Former Culture Secretary and Blairite MP Ben Bradshaw stormed out of the heated meeting, protesting that the meeting had been a “total f***ing shambles”.

Bassetlaw MP John Mann told his colleagues in the meeting that the U-turn within two weeks on a key economic policy was a "huge joke".

Labour has sent an email to members explaining its position, saying it is "dangerous" to make borrowing for investment illegal because it could "force a government to keep making cuts".

Labour has contacted supporters explaining why the party is against the fiscal charter, arguing it is “dangerous” in making it illegal to borrow for investment and because it could “force a government to keep making cuts”.

The email said: “It is crucial that we reduce the deficit, and Labour takes this mission seriously, but it must never be on the backs of the most vulnerable, or at the cost of the key public services we all rely on.”

In a surprised announcement in his speech to the Labour party conference two weeks ago in Brighton Mr McDonnell announced that the party would back the Government's fiscal charter.

But on Monday - exactly two weeks later - he said he had changed Labour's position because of the global economy and fears the charter would mean more cuts to public spending.

He said his visit to Redcar, where a major steelworks was forced to close, made him realise the cuts that would be enforced by the new rules would lead to a failure to invest in key infrascture and said he did not want Labour "associated with this policy".