Conservatives Defeated On Plans To Cut Tax Credits For Low Earners
The House of Lords has voted to delay George Osborne's proposed cuts until the government can find compensation for those affected.
The Conservatives have been defeated in the House of Lords over plans to cut tax credits for low-earners after peers dramatically backed a Labour proposal requiring the government to pay compensation to people affected by the changes.
The House of Lords voted to delay tax credit changes by 289 to 272, in a major blow for chancellor George Osborne. The vote followed a long debate that saw the government accused of taking a "morally indefensible" stance on the plan to reduce the welfare budget.
Labour's Baroness Hollis, who introduced the amendment requiring compensation for those affected, accused David Cameron of lying to the public during the election about his intention to cut tax credits.
She said that had the plans gone ahead, millions of individuals would find out, in letters sent to their homes at Christmas, that they would lose thousands of pounds. "Those families believed us when we all said that work was the best route out of poverty, that work would always pay," she said. "They believed the prime minister when he said tax credits would not be touched."
Following the humiliating defeat, Osborne told the BBC he will now introduce new measures to reduce the impact of the changes, despite insisting for weeks he would make no such compromise.
Labour shadow chancellor John McDonnell said it would now be an "outrage" for the tax credit changes to be reintroduced. "These cuts would hit working people the hardest," he said. "It's just unacceptable, not just to the House of Lords but also to MPs on all sides in the House of Commons."
Earlier in the day research had suggested millions of families would be left worse off by the changes. Meanwhile, figures produced by the Child Poverty Action Group showed the impact on various low-paid jobs, calculating that a cleaner earning £14,592 a year would lose more £1,800 in tax credits from 2016 to 2017.
The changes had been due to come into effect in April.
Conservative ministers had insisted that any attempt by the Lords to block the tax credit cuts would prompt a constitutional crisis, since peers by convention do not block financial proposals already passed by the House of Commons. But Labour, Liberal Democrat, and cross-bench peers ignored the warning to amend the legislation.
As a result, they left the government with a major headache when it comes to implementing a policy that was supposed to cut £4.4 billion a year from the welfare budget.
Hollis said her successful amendment was designed to protect people struggling with living costs: "It will protect deserted mothers and lone parents who want their children to grow up in a household where their parent works; carers who live out their lives in service to others and struggle to maintain a foothold in the labour market; working families ... who exhaust themselves caring for disabled children; or the self-employed, who will, I really hope, help us build a more productive and entrepreneurial economy."
She also referred to the "Christmas letters" that individuals and families were due to receive at the end of the year explaining how much money they would lose, and quoted some of the individuals who would be affected. She said: "Angela from Stevenage says: 'I already work 40 hours a week on minimum wage doing two jobs around my children. I cannot believe that this is actually going to happen. I am terrified. We are not scroungers. We work unbelievably hard just to keep going and, once again, we are being punished for trying to earn a living wage.' She will lose £1,643 a year after she gets that Christmas letter."
Earlier the Bishop of Portsmouth, who had tabled a milder motion expressing regret for the changes, had called the cuts "morally indefensible".
Even Lord Lawson, who served as Conservative chancellor in Margaret Thatcher's government, said Osborne needed to reconsider the plans and find ways of reducing the impact of the tax credit changes. "It is not just listening that is required," he said, "it is change that is required. I very much hope that my noble friend will indicate that there is going to be change."
Baroness Stowell, the Tory leader in the House of Lords, had hinted Osborne would "listen very carefully" if peers did not vote for the delaying amendments, suggesting the chancellor may have been willing to water down the plans in some form.
Despite this, peers ignored her pleas and voted against the government. Some were willing to break with convention because they felt the government chose an unusual form of parliamentary legislation to push through the changes to tax credits to avoid scrutiny.
"Of course they chose to do it because it cut off discussion," said Labour's Lord Richard. "It meant they were not accountable on the floor of the House of Commons. They decided that that was the way they were going to deal with it."
In the House of Commons, Tory MP Sir Edward Leigh suggested this was a constitutional crisis: "Not for 100 years has the House of Lords defied this elected house."
But it is the Conservatives who are now working out whether they can push through the tax credit changes in a different form.