151026Lords

The House of Lords has supported a motion calling for the Conservative Government’s tax credit cuts to be delayed until the Tories respond to concerns raised about their impact by the Institute for Fiscal Studies.

Crossbencher Baroness Meacher’s amendment to the statutory instrument cutting tax credits for millions of working households was that “this House declines to consider the draft Regulations laid before the House on 7 September until the Government lay a report before the House, detailing their response to the analysis of the draft Regulations by the Institute for Fiscal Studies, and considering possible mitigating action.”

The IFS has stated that around two-thirds of the people who will lose money from the cut will not see it equalised by the increase in the minimum wage planned by the Tories. Director Paul Johnson has said: “It’s kind of just obvious the majority will be worse off as a result of the package.”

In the debate, she said that eight Tory MPs had indicated they would not support the cut in a backbench debate on Thursday, meaning the Conservatives have lost their Commons majority in favour of it.

At the vote, the motion was supported by 307 peers and rejected by 277, providing a majority of just 30 votes.

It now remains to be seen what the Conservative Government in the House of Commons will do in response. Prior to this debate there was a great deal of talk about a “constitutional crisis” if the Lords were to reject the primacy of the Commons on financial matters.

Will Cameron and Osborne go through with suggested plans to flood the Lords with Tory peers, for example? It might ensure they get the support they want in future but they will also show themselves up as petulant, spoiled-brat overgrown schoolboys and their political opponents may never let them live it down.

Additional: The Hollis amendment – to protect those who lose out from the tax credit cuts – has also been passed, but by a smaller majority. It was passed by 289 votes to 272 – a majority of 17.

Labour Lady Hollis also had an amendment was that “this House declines to consider the draft Regulations laid before the House on 7 September until the Government, (1) following consultation have reported to Parliament a scheme for full transitional protection for a minimum of three years for all low-income families and individuals currently receiving tax credits before 5 April 2016, such transitional protection to be renewable after three years with parliamentary approval, and (2) have laid a report before the House, detailing their response to the analysis of the draft Regulations by the Institute for Fiscal Studies, and considering possible mitigating action.” The Lords were voting on this amendment at the time of writing.

She stated that it was not a fatal motion, but a delaying one, and had been drafted with the aid of the clerks. She said the purpose of tax credits had been misunderstood.

“They should not just be there to subsidise low pay. But imagine two women working in a call centre: one, who is single, works full time and earns £13,000 a year; another, a single mum, works 25 hours a week, and earns £9,000 a year. But she needs to support three people on that money.

“You cannot expect an employer to make up the difference. That is what tax credits are there for.”

The Lords rejected a ‘fatal’ amendment by Liberal Democrat Baroness Manzoor. While the Liberal Democrats were fully behind the motion to “decline to approve” the tax credits cut, other peers joined the 249 Conservatives to vote against it, as there is a widespread view in the Lords that it is not their job to reject Commons legislation unequivocally.

It is widely believed that the Conservative Party has no mandate to cut tax credits for millions of working people, as there was no mention of it in the Conservative manifesto prior to the general election, and David Cameron twice made unequivocal statements, to the nation via television, that a government led by him would not cut tax credits.

Lady Stowell, Leader of the House of Lords, tried to excuse this by saying the Tories had been clear that there would be cuts to “welfare” (their word for social security benefits), and that these would be aimed at working-age claimants.

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