David Cameron plans to set limits on the power of the House of Lords after George Osborne suffered a heavy blow to his authority when his peers voted to delay tax credit cuts to protect those who would lose out.
Downing Street will present plans for a “quick review” on Tuesday that will examine ways to ensure the House of Commons still has supremacy on financial matters, after the Prime Minister accused his peers of breaking a constitutional convention. The move comes after peers voted in favor of a motion by former Labor Minister Lady Hollis to end the cuts until the government produces a program to compensate low-paid workers for three years.
An irate prime minister made it clear that the upper house had shaken up conventions dating back to the aftermath of Lloyd George’s 1909 popular budget and beyond that peers do not interfere in financial matters. The planned tax cuts are designed to provide £ 4.4 billion of the Chancellor’s £ 12 billion planned in welfare cuts.
“The Prime Minister is determined that we will address this constitutional issue. A convention exists and it has been violated. He asked for a quick review to see how it can be put back into place, ”a Downing Street spokesperson said.
George Osborne, the chancellor, has indicated he will seek to ease tensions by mitigating the impact of the cuts which were suspended by the vote in the upper house. In language reflecting part of the motion, he told the BBC he would help those in difficulty during the “transition” period when he delivers his fall statement on November 25.
Osborne, who is likely to face Labor taunts in the House of Commons on Tuesday morning as he responds to the monthly Treasury Questions session, told the BBC: ‘Unelected Labor and Liberal lords have defeated a financial question passed by the elected House of Commons, and David Cameron and I are convinced that this raises constitutional questions that need to be resolved. However, it has happened and now we need to address the consequences of it. I said I would listen and that is precisely what I intend to do. I believe we can achieve the same goal: reforming tax credits, saving the money we need to secure our economy while contributing to the transition. This is what I intend to do during the fall declaration. “
It is understood that Osborne will make it clear in his fall statement that he remains committed to reducing the use of tax credits that were previously available to nine out of 10 families and are only expected to be available to five out of ten under of its changes.
But he will announce that he will mitigate the impact of cuts planned for a transition period amid concerns from ministers about the government’s lack of response to claims by the Institute for Fiscal Studies (IFS) that 3 million families would lose £ 1,000 a year. According to its original plans, the income level at which tax credits start to be withdrawn will be reduced from £ 6,420 to £ 3,850 from next April.
The “quick review” will find ways to ensure that the financial measures cannot be overturned by the House of Lords. Labor argued that it had a free hand because tax credits were introduced through a regulatory instrument and had not been declared as a formal financial measure. The review will also look at ways to ensure that regulatory texts cannot be overturned by the Lords, who have only done so on five occasions.
The government is happy that the Tories are speculating that the Prime Minister will fill the Lords with up to 100 new Tory peers in a bid to neutralize Labor and Liberal Democrats in the upper house. But that won’t happen because No.10 realizes he would put on the politically unpleasant spectacle of a Tory prime minister racing the upper house to push through his measures.
Downing Street and Treasury officials took action after Hollis’ motion was passed by 289 votes to 272 votes. Peers also voted for a more moderate motion by cross-peer Lady Meacher – by 307 to 277 – who refused to support the cuts until the government responds to the IFS analysis. A fatal motion, tabled by Lady Manzoor, her Lib Dem counterpart, was rejected by 310 votes to 99.
The Hollis motion said the upper house will refuse to approve tax credit cuts until the government offers “full transitional protection for at least three years for all low-income families and individuals. currently benefiting from tax credits before April 6, 2016 ”.
Michael Ellis, Conservative MP for Northampton North and parliamentary assistant to Theresa May, told Sky News: “We cannot have a situation where the unelected [House of Lords] trumps the democratically elected House of Commons. The House of Lords has resisted this temptation for 100 years … Tonight’s votes, especially on the Labor motion, [are] constitutional contempt. This involves £ 4.4 billion in public spending. The principle that the House of Commons dominates financial matters is essential to the functioning of our constitution.
The vote came after Hollis was heard in silence as she spoke about the impact of the cuts. She told her peers: “I hope I don’t sound pious, but I think it is about honoring our word, the word of the Prime Minister, that work must always pay off. It is, surely, respect for those who strive to do whatever we ask of them but now find themselves punished for doing what is right. It is about the trust between Parliament and the people we serve. “
John McDonnell, the shadow chancellor, has said he will cooperate with the chancellor if he abandons the tax credit cuts altogether. McDonnell, who will be able to challenge Osborne in the House of Commons on Tuesday, said: ‘The Chancellor must understand that cutting an average of £ 1,300 a year from more than 3 million working families is not a sensible plan, and people are waking up to what The Labor has been warning about for months. George Osborne must now go and consider the only reasonable option available to him. If it does a fair and complete U-turn on its tax credit cuts, then I will support it and the public will support it.
Peers across the Lords have expressed deep unease over the proposed tax credit cuts. Lord Lawson of Blaby, the former chancellor, called on Osborne to do more to help low-income people. He said: “Much of the injury here is at its lowest, and that is what needs to be reconsidered.”
John Sentamu, Archbishop of York, voted for the Hollis motion after warning that tax credit cuts could force low-income families to resort to loan sharks. Sentamu told his peers in his speech, “For families on poverty wages, we want to tell them: the government is serious about deficit reduction, but wants to do it in an orderly manner that will not let really men and women … in the hands of loan sharks. “