John McDonnell's U-turn in deciding to vote against plans for the Government to run a budget surplus sends the "wrong message" to the public about Labour's economic approach, his predecessor as shadow chancellor has claimed.
Shortly after his appointment by Labour's new leader Jeremy Corbyn, Mr McDonnell surprised Westminster by announcing Labour would back George Osborne's proposals for an updated Charter of Budget Responsibility to enshrine in law his target to achieve a surplus by the end of 2019/20 and to deliver surpluses every following year "in normal times".
The announcement last month was designed to give the lie to Tory claims that Labour were "deficit deniers" but led critics to say Mr McDonnell had fallen in to a trap which would limit Labour's scope for reversing austerity cuts and borrowing to invest.
Mr McDonnell explained his decision to Labour MPs and peers in a Westminster meeting which was described as a "f****** shambles" by one former Cabinet minister.
The shadow chancellor said the party will vote against the charter when it comes before the House of Commons on Wednesday, and will set out its own plan for "tackling the deficit not through punishing the most vulnerable and decimating our public services, but by ending the unfair tax cuts to the wealthy, tackling tax evasion and investing for growth".
His predecessor as shadow chancellor, Chris Leslie, said Labour needed a "clear and consistent" policy and said Mr McDonnell should instead table a rival motion and abstain on Mr Osborne's plan, refusing to play his "tactical game".
Mr Leslie warned: "To go from one extreme to the other is wrong in economic terms but also it sends the wrong message to the general public as well. So, to be fair to John McDonnell, this is a very difficult balancing act, it's a very difficult topic, but it's incredibly important that his is clear and consistent and explains fully not just what Labour's position is but why he backed George Osborne's surplus a couple of weeks ago and is now against it, apparently."
Mr Leslie told BBC Radio 4's Today programme: "I personally think it would be very regrettable if Wednesday's debate turns in to a discussion about why John McDonnell changed his mind rather than focusing on the shortcomings of George Osborne's strategy, which is what all Labour MPs ought to be focused on.
"But this is John's first test against George Osborne. I think it's very important therefore that Labour's frontbench is extremely clear about where we stand. People need to know what the Labour Party's position is.
"I think it's important that we give John and Jeremy a chance to set out their stall."
He added: "I can't explain why John went in favour of supporting and voting for George Osborne's strategy. I personally think it would have been better to say, in principle, we support the concept of a surplus but if certain conditions, certain tests are passed.
"For example, can we be certain that the viability of public services - our NHS, our national security - would be safe."
Explaining his position, Mr McDonnell said: "As the nature and scale of the cuts Osborne is planning are emerging, there is a growing reaction not just in our communities but even within the Conservative Party.
"The divisions over the cuts in tax credits to working families are just the first example of what we can expect as the cuts in other departments are exposed and the failure to find additional resources to bridge the growing expenditure gap in service areas like the NHS is revealed.
"We will underline our position as an anti-austerity party by voting against the charter on Wednesday.
"Labour will set out our plan for tackling the deficit not through punishing the most vulnerable and decimating our public services, but by ending the unfair tax cuts to the wealthy, tackling tax evasion and investing for growth."
Following the Parliamentary Labour Party meeting in the Commons, Blairite former cabinet minister Ben Bradshaw declared, within easy earshot of waiting reporters: "Total f******* shambles."
A senior party spokesman was unable to say whether the shadow cabinet had met to discuss or approve the change in policy - or whether Labour MPs would be under a three-line whip to vote against.
He said Mr McDonnell was "quite clear in the meeting that he had spoken to the shadow cabinet".
He rejected suggestions Mr Bradshaw represented the wider tone of the meeting.
"I don't think it was angry. I really wouldn't say that. There was some discussion about the business this week. I thought generally the meeting was quite positive.
"The only disagreement really was that there needed to be more discussion."