Labour announces new rule to balance 'day-to-day spending'

A future Labour government would introduce a new "fiscal credibility rule" to balance Britain's finances, the shadow chancellor has announced.

John McDonnell said that if Labour wins the next general election, it would manage public spending with "discipline" and would get rid of the deficit in a "fair and responsible way".

In a key pre-Budget speech, he explained that day-to-day spending would exceed not government income and Labour would commit to always eliminating the deficit on current spending in five years.

But the shadow chancellor also said he would still allow the borrowing of billions of pounds to invest in major infrastructure projects.

He said that low government borrowing rates were an opportunity to spend more money on investment that could help boost growth in the UK economy.

Mr McDonnell emphasised that it was crucial for Labour to win back public confidence and convince voters the party can be trusted with the nation's finance.

He said that austerity made little sense in economic terms and Labour had to make a radical break with the past.

He added that when governments do not manage their finances responsibly, it is ordinary working people who end up suffering.

His announcement comes five days before the Budget, which is due on Wednesday 16 March.