The World at One
BBC Radio 4

Richard Murphy is a professor of political economy at City University and has been acting as an informal adviser to the Labour leadership. He defends Labour's change of policy, saying the budget surplus rule is a "political gimmick" and Chancellor George Osborne has "no hope" of delivering it.

He says Labour has realised it can't modify the rule and so will have to oppose it. John McDonnell is just making the case that "we can no longer treat this like a gimmick" which, he says, "makes sense".

The World at One
BBC Radio 4

Karim Palant, Ed Balls' former head of policy, says the U-turn is "very damaging" for Labour because it conveys that the shadow chancellor "is either unclear of what he was going to vote on... or hadn't thought it through properly". That raises big questions about future statements he makes on economic matter, which could hamper voters' trust in the party, he adds.

House of Commons
Parliament

In the House of Commons exchanges about the closure of Redcar steel works has just come to an end.

During it local Labour MP Andy McDonald accuses the minister of hiding behind state aid rules to avoid saving the Redcar steelworks: "She could intervene but the government has lifted the white flag. Its an absolute disaster and they should be ashamed of themselves."

Minister Anna Soubry denies hiding behind state aid rules. The reality of the situation, she argues is that the price of steel has almost halved. She issues a challenge to the MP for Middlesbrough "tell me what we could do within the state aid rules and I'll have a look at it because we've explored everything. 

Read more of the debate on Westminster Live

The World at One
BBC Radio 4

Clive Lewis, shadow energy and climate change minister, says he's tired of Labour's "navel gazing" and is "a lot happier" with the party's new position on the budget surplus rule. Put to him that a number of MPs may defy the party whip in the vote, he says he's under the impression some in the party will vote against the party line, whatever it is, as they don't like the leadership

The World at One
BBC Radio 4

Labour MP Emma Reynolds, a former shadow minister, says John McDonnell will have the opportunity on Wednesday to "set out his stall" and explain the policy U-turn.

She says Labour needs to show the public it understands that it lost the election because voters "don't trust us on the economy". She hopes the shadow chancellor sets plans to reduce the deficit and restore voters' trust in the party on the economy.

Asked if she'll obey the party whip and vote against the charter, she says she hasn't decided yet.

Iain Watson
Political correspondent

A Labour shadow cabinet member has said today’s meeting of the party's shadow ministers "wasn’t like last night’s PLP".

The tone overall was "constructive" but the handling of the change of policy and how it was communicated was criticised, and John McDonnell undertook to do a "media round" this afternoon to explain it, they said.

The shadow cabinet member indicated they had no desire themselves to do interviews to justify the change of line.

Laura Kuenssberg
BBC political editor

In the short term, John McDonnell's U-turn leaves the new leadership with a potential rebellion on its hands. Labour moderates like the former shadow chancellor Chris Leslie plan to abstain on what is "John's first big test", and many others may join him.

Jeremy Corbyn gave John McDonnell the job of running Labour's economic policy against the advice of many others. If the last 24 hours are anything to go by, he may in time conclude it would have been better to listen to that counsel.

Read Laura's full blog

The Daily Politics

Conservative MP Nigel Evans urges Tom Watson to apologise for his conduct with regard to the late home secretary Lord Brittan, saying he had "pursued him beyond the grave" in relation to what he knew about abuse allegations. Mr Evans, who was acquitted of charges of sexual assault following a trial in 2014, said he always believed Mr Watson - who made a statement to Parliament on Monday - was a "decent chap" but the Labour MP had gone too far - pursuing the issue of an alleged paedophile ring in Westminster without "the tools" to properly investigate. He urges the MP to show a "scintilla" of feeling for the "trauma" that Lord Brittan's family had gone through, adding that a "new group of victims" was being created - people "wrongfully accused in the full glare of publicity". 

More from Downing Street on the background to the government's decision not to proceed with a £5.9bn contract to provide services to the Saudi prison system. The prime minister's spokeswoman said it reflected the government's decision to focus on domestic priorities. She also said the Ministry of Justice had established that it could withdraw from the bid process with no financial penalties.

The UK government has withdrawn from a controversial £5.9m prisons deal with Saudi Arabia. Downing Street has also said David Cameron is writing to the Saudi government about the "extremely concerning" case of Briton Karl Andree.

A senior Labour spokesman has said there was "common agreement" on the party's fiscal charter position at shadow cabinet this morning.

He said there was a "very positive, business-like" atmosphere.

He denied there had been any U-turn on policy and said John McDonnell would have to respond to questions about whether the position had changed since the Labour conference.

The Daily Politics

John Mann has been laying into the shadow chancellor this morning. He has continued in that vein, telling Daily Politics that Mr McDonnell has "had his fingers badly burnt" by the episode, which he calls a "tremendous own goal". For Mr McDonnell to announce a position and then change it without consulting the party was "crass", he says. Mr McDonnell is "inexperienced" as a frontbencher and must learn lessons quickly, he adds. Emma Reynolds, a former shadow minister who is on the right of the party, says the situation was "very unfortunate" and it is "problematic to change your mind...and not to have a good reason for doing so". She says she has not decided which way to vote on the fiscal charter this week. Although she says the charter is a "political gimmick", she says Labour needs to demonstrate its credibility on the economy, which she says was squandered early in the last Parliament.

Vicki Young
Chief Political Correspondent

One shadow minister told me today's shadow cabinet meeting was like "the morning after the night before". He likened it to a marital row and said shouting at each other through a loud hailer was all very well but in the end you have to sit down and talk about it - so shadow cabinet was more reflective.

The Daily Politics

Labour commentator Polly Toynbee says John McDonnell's handling of the budget surplus issue was "catastrophic". She tells Daily Politics that "everyone is united that you cannot run a party in this way". She suggests the shadow chancellor John McDonnell came under "enormous pressure" from the left of the party to change direction because being seen to back a pro-austerity position after Jeremy Corbyn won the election on an anti-austerity platform would have damaged the leadership and been a matter of "absolute joy" to the SNP. 

Iain Watson
Political correspondent

Image source, PA

The vast majority of Labour MPs didn't want Jeremy Corbyn as their leader - and they anticipated that divisions would be inevitable on everything from nuclear weapons to Syria. 

But what rattled them at last night's meeting of the Parliamentary Labour Party wasn't the politics of the leadership, but a perceived lack of competence.

They assumed at the very least that the straight-talking of the leadership election would have become embedded. 

Instead they had a lack of clarity from a leader who largely remained silent while some of his supporters were verbally savaged by sceptical MPs - as his shadow chancellor reversed his position of just a fortnight ago not to oppose George Osborne's fiscal charter. They were also dismayed at the lack of consultation about a potentially significant change of direction.

So they are now nervous about what else might go wrong and whether the approach of near-peaceful co-existence is sustainable. 

Yet the U-turn, however badly affected, wasn't without logic. If Labour gets an even worse result in next year's Scottish elections - and polls suggest it might - than in 2011, pressure will mount on the Corbyn leadership. 

The SNP will vote against the fiscal charter this week and would have been delighted to see Labour pay lip service to it. Nicola Sturgeon could then portray her party as the only major political force that opposed austerity.

So while still insisting he isn't a "deficit denier" John McDonnell had to protect his party's left flank. But the manner and speed of his manoeuvre has left many of his own MPs dazed and confused.

The Daily Politics

Jo Coburn has been joined by Polly Toynbee as her guest of the day on today's programme - now on BBC2.

They will look at Labour’s decision to oppose George Osborne’s Fiscal Charter with John Mann and Emma Reynolds, and at former Labour figures now sitting on the backbenches with Luke Akehurst from Labour First, and Conrad Landin, industrial reporter for the Morning Star.

There will be a look at the government’s Immigration Bill with Conservative MP Peter Bone and Labour's shadow home office minister Jack Dromey.

And Jo will also be joined by the New Zealand High Commissioner, Sir Lockwood Smith, as it faces two referendums on the future of its national flag,

After the Metropolitan Police apologised to the widow of Leon Brittan, there will be a replay of Tom Watson and Nicholas Soames in the Commons, before Conservative MP Nigel Evans, who stood trial accused of rape but who was acquitted of all charges last year, joins in the studio debate.

David Cameron has responded to Home Office figures showing a 18% increase in hate crimes in 2014-5 in England and Wales.

Image source, PA

There are two urgent questions in the Commons today, with ministers having to respond to high-profile subjects that have been in the news over the past couple of days. The first question will be from Labour's Anna Turley on the future of the steel industry and its supply chain in Redcar following the closure of coke ovens at the plant and the liquidation of parent company SSI. The second is from Labour's Andy Slaughter about whether the UK government will withdraw from a contract to provide services to the Saudi Arabian prison system in light of recent cases and concerns about the country's human rights record.