Osborne to water down tax credit transition – but vows revenge on Lords blockage

Downing Street will carry out a “rapid review” into ways of ensuring the Commons always has the final word on financial matters, after chancellor George Osborne’s tax credit reforms suffered a major defeat in the Lords yesterday (26 October).

In a heated night of debate, peers voted by 289 votes to 272 to back Labour’s calls for a full redress to the millions of low-paid workers set to lose out from current proposals.

Osborne faced a second defeat after peers backed delaying the cuts until a comprehensive assessment of their financial cuts is carried out.

Although the chancellor said he would listen to the concerns being raised and would set out how changes would be achieved in the Spending Review, he told the BBC that the Lords blockage raised “constitutional issues”.

According to prime minister David Cameron, the upper house contradicted conventions dating back to the aftermath of Lloyd George’s People’s Budget of 1909 which clarified peers do not interfere in financial matters.

The chancellor said: “Tonight, unelected Labour and Liberal Lords have defeated a financial matter passed by the elected House of Commons, and David Cameron and I are clear that this raises constitutional issues that need to be dealt with.

“However, it has happened, and now we must address the consequences of that. I said I would listen and that’s precisely what I intend to do.

“I believe we can achieve the same goal of reforming tax credits, saving the money we need to save to secure our economy, while at the same time helping in the transition. That is what I intend to do at the Autumn Statement.”

Answering questions in the Commons today, Osborne guaranteed that he will press on with the cuts but would look into ways of lessening the impact on families during the three-year transition, until the new national living wage is introduced in full.

“We will listen on the transition, but we are determined to deliver controlled welfare,” he continued, adding that it is essential to remove the deficit and reject those who want to “borrow forever”.

He was slammed by Labour and Scottish National Party members who begged the chancellor to shelve the “ridiculous tax credit cuts” and stop “manufacturing a phony constitutional crisis”.

But Osborne reiterated that peers have never blocked a financial matter before, meaning yesterday’s vote was unprecedented and will be addressed to reassert the Commons’ primacy over spending-related decisions.

(Top image c. Richard Stonehouse/PA Wire)


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