Labour defends move to delay tax credit cuts in House of Lords vote

House Of Lords

Labour has hit back at claims it was tampering with the British constitution by encouraging peers to delay the implementation of tax credit cuts in a key vote, saying Conservative peers have in the past voted down key financial measures brought forward by a Labour government.

Peers will be given three different ways to block the tax credits cuts in a vote on Monday, but the support seems to be coalescing around a move by the Labour backbencher Patricia Hollis to delay endorsement of the cuts until ministers have set out proposals on how the impact can be mitigated over the next three years.

Some crossbenchers in the unelected Lords are reluctant to support the delay, fearing it breaks a convention dating back to 1911 that peers do not vote down financial proposals passed by the House of Commons.

But Labour pointed out that in July 2008 Conservative peers passed an amendment requiring Labour only to raise the national insurance upper threshold through primary legislation.

The current government chief whip, John Taylor, was among those who voted to block the rise in national insurance.

The dispute over the constitutional rights of the Lords came as George Osborne said the move to cut tax credits had been signalled in the general election by the Conservatives.

Giving evidence to the Treasury select committee, the chancellor insisted there had been a clear indication about the makeup of the cuts and a subsequent debate during the campaign.

“People know what we’ve proposed, and of course in the general election we made it very clear we needed to make £12bn of savings from welfare. So it was also signalled in the general election campaign and, I seem to remember, heavily debated in the general election campaign,” he said.

However, in the week before the election, Michael Gove, then the chief whip, said “we are not going to cut them”, while David Cameron gave an answer suggesting he was not planning to cut child tax credits.

In July, Osborne unveiled steep cuts to tax credits, which the Institute for Fiscal Studies says will cost more than 3.3 million families up to £1,300 each. He also announced that child tax credits would in future be limited to two children.

Rachel Reeves, the shadow work and pensions secretary, said: “Far from these proposals being signalled, George Osborne and David Cameron did everything possible to avoid saying how they would cut £12bn from welfare. I debated Tory minister after Tory minister who refused to say how they would make up the £12bn welfare cuts.”

At a high-profile Labour press conference on 29 April, one week before polling day, Reeves asked: “Will you, David Cameron and George Osborne, guarantee that you will not cut family tax credits again? Will you, David Cameron and George Osborne, guarantee that you won’t hit family budgets like you did in the last parliament?

“The simple answer is that they cannot offer guarantees because you cannot make these extreme cuts to social security and to public spending without hitting ordinary working families. So these plans might be secret, but they are the Tory plans nonetheless.”

Reeves told the Guardian: “After I made this challenge to Cameron, he refused to respond.”

Despite pressure from some of his own Tory colleagues to soften the impact of the cuts, the chancellor declared on Thursday that he was comfortable with his decision.

“This is fundamentally a judgment call, and I’m comfortable with the judgment call that I have made, and that the House of Commons has supported this week,” Osborne told MPs.

Andrew Tyrie, the Conservative chair of the committee , repeated his demand for the Treasury to provide more detailed analysis of how the proposed cuts will hit households at different points on the income scale.

On Wednesday Cameron told parliament he was “delighted” that MPs had passed the billions of pounds in cuts to family incomes. John McDonnell, the shadow chancellor, said it showed the “true face of the Tory party”.

“It is shameful that David Cameron talked about his delight at tax credit cuts and now George Osborne has said he is comfortable with his decision to take £1,300 a year away from working families,” McDonnell said. “It’s time for David Cameron and George Osborne to think again and reverse these tax credit cuts.”

There have been reports of a split between Cameron and Osborne on the issue, with the Treasury more adamant than No 10 that the cuts must stand, but both are publicly defending the strategy.

Both initially insisted people would be compensated by a higher minimum wage, tax cuts and extra free childcare, but the government has now conceded some will lose out.

A number of Conservatives including the mayor of London, Boris Johnson, the former cabinet minister Andrew Mitchell and the former chancellor Nigel Lawson have been urging Osborne to change the plan, while Labour, the SNP and Liberal Democrats want the cuts scrapped altogether.

Speaking on BBC Radio 4’s Today programme on Thursday, Lawson, who was chancellor from 1983 to 1989, said: “You cannot remove these tax credits without people being worse off. The question is who is going to be worse off. People are going to get better off as the economy grows, and it is growing and we want a successful economic policy to ensure it continues to.

“But there is a problem. Tax credits go a long way up the scale. It goes up to half the families in the land. And so the tweaking would be to make the burden – and there is always a burden when you make these tough decisions to cut tax credits – rather less for the people towards the bottom end of the scale.”

The cuts are already tapered but some welfare experts, including the Labour chairman of the work and pensions committee, Frank Field, have suggested ways the lowest-paid could be cushioned.

A blog by the Resolution Foundation thinktank analyses some possible solutions to help those affected, but concludes there is “no easy way to compensate for the loss of £4.5bn of state support for working families”. It says raising the personal allowance, lifting the minimum wage or increasing hours worked will not be enough.

The Liberal Democrats have said they will try to kill off the proposals when they go through the House of Lords. Labour peers will try to amend the measures. Lawson said any fatal motion from peers would be unacceptable.

“It is a matter for George Osborne, on reflection, to look at and make changes if he feels necessary in his budget in the spring,” he said. “It would be wholly wrong constitutionally, wholly wrong, for the unelected House of Lords – which should debate it and argue about it – to do anything that would kill something of a financial nature which has been through the House of Commons, approved by the House of Commons not once but twice.”

John Bercow, the speaker of the Commons, has also reminded peers of the convention and their responsibilities as a revising chamber.

Powered by Guardian.co.ukThis article was written by Patrick Wintour and Rowena Mason, for theguardian.com on Thursday 22nd October 2015 19.24 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010