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John McDonnell is committed to borrowing - from Ed Balls and Ed Miliband

The shadow chancellor's fiscal stance is most notable for its familiarity. 

It’s as if Ed Balls never went away. John McDonnell regularly denounced his predecessor as “austerity-lite” but his new “fiscal credibility rule” is strikingly familiar. In his speech at the RSA this morning, the shadow chancellor pledged that Labour would run a current budget surplus if elected, reduce debt as a share of GDP and only borrow to invest - a near-identical stance to that adopted by Balls in 2015 (and close that of Gordon Brown in office). “If you’re putting the rent on the credit card month after month, things need to change,” McDonnell said, adopting George Osborne’s analogy of choice. Elsewhere, he echoed Liz Kendall’s words during the Labour leadership contest, declaring that “There is nothing left-wing about ever-increasing government debts, or borrowing to cover day-to-day expenses.” What, many are asking, was the fighting all about?

McDonnell would point out, as he did at the end of his speech, that his rule comes with caveats. The most notable is that when monetary policy is “constrained” (“by hitting a lower bound as it did after the global financial crisis”), the promise of a current surplus is suspended. At such times, McDonnell said, expansionary fiscal policy would be needed “to get the economy moving again”. But with interest rates still at a record low of 0.5 per cent (and unlikely to increase significantly), it was unclear when, if ever, the rule would be operational. But since McDonnell, unusually, left without taking questions, journalists didn’t get the chance to ask him.

Similarly unclear was whether the shadow chancellor was prepared to countenance spending cuts, rather than merely tax rises, to ensure a current surplus. “I am making no announcements today about our spending commitments,” McDonnell said.

Much of the rest of the speech on boosting productivity, raising skills and increasing exports was also familiar. McDonnell even went so far as to praise Peter Mandelson, the bête noire of the Labour left, for his “prompt action” as business secretary in the aftermath of the financial crisis. With some exceptions (a new “Right to Own” for employees), many of the policies were first floated in the Miliband era (a National Investment Bank, reduced tax avoidance, increased housebuilding).

If there is a defining difference it is rhetorical. Though their rules allowed borrowing for investment, Miliband and Balls were always fearful of saying so. Labour’s profligate reputation led them to act by stealth. McDonnell has no such shame, proudly declaring his intention to invest and harnessing the support of “the Financial Times, the Economist, every single economist who appeared in front of the Treasury Select Committee”. Yet while Labour’s commitment to spend is clearer than ever, it is its willingness to save that voters need to be convinced of. McDonnell embraced that cause today but the tough questions have been deferred. 

Update: One Labour MP told me in response: "John McDonnell's speech is tonally a tribute to Ed Balls. John is either now the ultimate 'Red Tory' or he, Jeremy and their followers lied and should apologise for accusing the mainstream of the party for being so, because this speech is an admission that the rest of us were and are not Osborne austerians." 

George Eaton is political editor of the New Statesman.

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Why isn't Labour putting forward Corbynite candidates?

Despite his successes as a candidate, the organisational victories have gone the way of Corbyn's opponents. 

The contest changes, but the result remains the same: Jeremy Corbyn’s preferred candidate defeated in a parliamentary selection. Afzhal Khan is Labour’s candidate in the Manchester Gorton by-election and the overwhelming favourite to be the seat’s next MP.

Although Khan, an MEP, was one of  the minority of Labour’s European MPs to dissent from a letter from the European parliamentary Labour party calling for Jeremy Corbyn to go in the summer of 2016, he backed Andy Burnham and Tom Watson in 2015, and it is widely believed, fairly or unfairly, that Khan had, as one local activist put it, “the brains to know which way the wind was blowing” rather than being a pukka Corbynite.

For the leader’s office, it was a double defeat;  their preferred candidate, Sam Wheeler, was kept off the longlist, when the party’s Corbynsceptics allied with the party’s BAME leadership to draw up an all ethnic minority shortlist, and Yasmine Dar, their back-up option, was narrowly defeated by Khan among members in Manchester Gorton.

But even when the leadership has got its preferred candidate to the contest, they have been defeated. That even happened in Copeland, where the shortlist was drawn up by Corbynites and designed to advantage Rachel Holliday, the leader’s office preferred candidate.

Why does the Labour left keep losing? Supporters combination of bad luck and bad decisions for the defeat.

In Oldham West, where Michael Meacher, a committed supporter of Jeremy Corbyn’s, was succeeded by Jim McMahon, who voted for Liz Kendall, McMahon was seen to be so far ahead that they had no credible chance of stopping him. Rosena Allin-Khan was a near-perfect candidate to hold the seat of Tooting: a doctor at the local hospital, the seat’s largest employer, with links to both the Polish and Pakistani communities that make up the seat’s biggest minority blocs.  Gillian Troughton, who won the Copeland selection, is a respected local councillor.

But the leadership has also made bad decisions, some claim.  The failure to get a candidate in Manchester Gorton was particularly egregious, as one trade unionist puts it: “We all knew that Gerald was not going to make it [until 2020], they had a local boy with good connections to the trade unions, that contest should have been theirs for the taking”. Instead, they lost control of the selection panel because Jeremy Corbyn missed an NEC meeting – the NEC is hung at present as the Corbynsceptics sacrificed their majority of one to retain the chair – and with it their best chance of taking the seat.

Others close to the leadership point out that for the first year of Corbyn’s leadership, the leader’s office was more preoccupied with the struggle for survival than it was with getting more of its people in. Decisions in by-elections were taken on the hop and often in a way that led to problems later down the line. It made sense to keep Mo Azam, from the party’s left, off the shortlist in Oldham West when Labour MPs were worried for their own seats and about the Ukip effect if Labour selected a minority candidate. But that enraged the party’s minority politicians and led directly to the all-ethnic-minority shortlist in Manchester Gorton.

They also point out that the party's councillor base, from where many candidates are drawn, is still largely Corbynsceptic, though they hope that this will change in the next round of local government selections. (Councillors must go through a reselection process at every election.)

But the biggest shift has very little to do with the Labour leadership. The big victories for the Labour left in internal battles under Ed Miliband were the result of Unite and the GMB working together. Now they are, for various reasons, at odds and the GMB has proven significantly better at working shortlists and campaigning for its members to become MPs.  That helps Corbynsceptics. “The reason why so many of the unions supported Jeremy the first time,” one senior Corbynite argues, “Is they wanted to move the Labour party a little bit to the left. They didn’t want a socialist transformation of the Labour party. And actually if you look at the people getting selected they are not Corbynites, but they are not Blairites either, and that’s what the unions wanted.”

Regardless of why, it means that, two years into Corbyn’s leadership, the Labour left finds itself smaller in parliament than it was at the beginning.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.