Defiant peers force Osborne into tax credit climbdown
Peers overrule MPs and delay tax credit cuts Vote is break with centuries of convention Now Cameron threatens them with reprisals
Peers plunged Britain into constitutional crisis last night by overturning the views of elected MPs and throwing out cuts to tax credits.
For the first time in more than 100 years, the House of Lords rejected a finance measure approved by the Commons.
The vote forced George Osborne into an embarrassing climbdown and last night he said that he would announce measures in next month’s Autumn statement to help poorer workers.
In an extraordinary show of defiance, the Lords approved a Labour motion that will force Mr Osborne to delay the controversial cuts until he comes up with a plan to compensate low-paid workers for at least three years.
They also backed a crossbench motion that demanded the cuts to be delayed until the Government responds to an analysis of their impact by the Institute for Fiscal studies and considers ‘mitigating action’.
Downing street said the UK was now in ‘uncharted waters’ after the vote, which goes against centuries of tradition that the House of Commons has primacy in financial matters.
‘Determined to address this issue’
‘Keep faith with struggling families’
Labour and Liberal Democrat peers teamed up to pass the motions in the Lords, where the Tories do not have a majority.
Downing street said there would now be a ‘rapid review’ on how the convention that the Lords cannot defeat the Commons on finance could be restored, with details announced today. It is expected the review will consider limiting the powers of the Lords, rather than flooding the chamber with Tory peers.
‘The Prime Minister is determined we will address this constitutional issue,’ the spokesman said.
‘A convention exists and it has been broken. He has asked for a rapid review to see how it can be put back in place.’
Tory MPs reacted with fury, with Michael ellis, an aide to Theresa May calling the vote as ‘a constitutional outrage’ that warranted ‘consequences’ for the House of Lords.
It has been a convention since the late 17th century that the Commons have primacy in financial matters, and the Parliament Act 1911 made it law that the Lords cannot overturn a finance vote by MPs. How- ever, Labour said this was different because the tax credit cuts were introduced not in a bill but by a ‘statutory instrument’ – meaning there is no constitutional problem in peers rejecting it.
The highly-charged Lords debate lasted more than three and a half hours with a string of bishops attacking the cuts. Peers voted by 307 to 277 – a majority of 30 – to approve an amendment put down by independent crossbench peer Baroness Meacher that demanded the cuts be delayed until the Government responds to analysis of their impact by the Institute for Fiscal studies and considers ‘mitigating action’.
Then, just minutes later, the Gov- ernment was defeated a second time, – by 289 votes to 272 – a majority 17, when peers approved a Labour motion to delay the cuts until ministers come forward with ‘full transitional protection’ for those affected for at least three years.
earlier, a Liberal Democrat bid to kill off the cuts altogether was heavily defeated by 310 votes to 99.
Last night shadow chancellor John McDonnell called on the Chancellor to obey the will of unelected peers and come back with new proposals.
‘George Osborne’s got to think again,’ he said. ‘He’s been defeated twice in the Lords tonight.
‘But there are a large number of Conservative MPs as well who have been telling him very very clearly he’s got to think again on this one.’
Mr Osborne said: ‘ Unelected Labour and Liberal lords have voted down a matter passed by the elected House of Commons. That raises constitutional issues, and David Cameron and I are clear they will need to be dealt with.
‘On tax credits I said I would listen to the concerns that have been raised and that’s precisely what I will do. We were elected to deliver this lower- welfare higher- wage economy and that is exactly what we will do.’ Transitional help for poorer families could look at changing the design of the tax credit reforms, such as phasing them in more slowly.
The changes introduced by the Chancellor in his post- election budget aimed to slash £4.4billion from working tax credits and child tax credits.
But they would have meant that more than three million families will lose an average of £1,300 a year from April, according to some estimates. The Institute of Fiscal studies rejected Government claims that other measures – including a higher minimum wage and more free childcare – would compensate.
Introducing her motion, Labour’s former work and pensions minister Baroness Hollis of Heigham urged peers to ‘keep faith with struggling families’ by delaying cuts to tax credits. She dismissed suggestions that voting for a delay would trigger a constitutional crisis, claiming this was a ‘fig-leaf’.
The Archbishop of York, John Sentamu, warned against driving working families into the hands of ‘loan sharks’.
The Bishop of Portsmouth, Christopher Foster, said to Opposition cheers: ‘ These proposals are morally indefensible.’
The first female bishop to enter the House of Lords, Bishop of Gloucester rachel Treweek, called for peers to send a ‘loud message’ to Mr Osborne about protecting working families. Lord Campbell-Savours, a Labour peer, accused Mr Cameron of lying about the cuts during the general election.
However, Lord Butler, Cabinet Secretary during the premierships of Margaret Thatcher, John Major and Tony Blair, said it was wrong for peers to go against the will of the Commons.
‘However much sympathy the House may have, it would be a constitutional infringement of great gravity,’ he said.
Former Tory chancellor Lord Lawson said he believed there were ‘aspects to these measures which need to be reconsidered and indeed changed’.
But he insisted the upper house had no right to vote the measures down. ‘This is a budgetary matter, however it is dressed up,’ the Tory peer said.