Recalcitrant Lords defy tax credit cuts

The House of Lords controversially voted to delay the implementation of George Osborne’s tax credit cuts, the first time in a century that the upper house has defied the elected Commons on a financial matter. This was a “clear breach” of the Parliament Act, says The Daily Telegraph. To argue otherwise on the basis that the tax credit cuts were not formally designated as a financial measure is “procedural casuistry”. In response, Lord Strathclyde is to chair a “rapid review” of the relationship between the two houses of parliament.

But, for now, the government is not following through on threats to create hundreds of new Tory peers to counter the opposition – a move that “would be foolish, especially when it is also proposing to reduce the size of the Commons”, says Vernon Bogdanor in the Financial Times. Instead, they “should turn the conventions of financial privilege into statute so that it is clear where democratic responsibility lies”.

As for the £4.4bn of tax credit cuts – which is what voters really care about – Osborne now has to come up with a “more politically palatable proposal”, says an editorial in the FT. Assuming that he sticks to his commitment to a £10bn budget surplus by 2019-2020, that will not be easy.

Health, education, defence and overseas aid spending is ring-fenced and Osborne is “also hemmed in” by promises to raise the basic rate threshold, reduce inheritance tax and protect spending on the elderly. And that’s exactly why the chancellor should “stand firm”, says Leo McKinstry in The Daily Telegraph. The Tories were re-elected in May with a manifesto pledge to cut welfare spending by £12bn, showing that most of the public recognises the need for reform. Tax credits cost too much, “promote low productivity” and “fuel benefits dependency”.

The bill for tax credits has now soared from £4bn a year in 2001-2002 to £30bn a year, says Andy McSmith in The Independent. Seen in the context of his proposed increase to the minimum wage, Osborne’s objective is to shift “part of the burden of supporting the poor from the state to business”, says John Kay in the FT. This is not necessarily a bad idea. “But whenever you are dealing with the finances of people who live from week to week, any change must be gradual, and preferably imperceptible. The scale of the present controversy is a powerful signal that this principle has not been observed.”

Absolutely, says Isabel Hardman in The Times. Osborne could have chosen to introduce the cuts only for new claimants, “avoiding the horror of families opening letters just before Christmas that tell them they will lose around £1,300”. But instead he pressed ahead, ignoring worried backbenchers or having his “henchmen” shout them down. The result is that “it’s difficult even for those who support the chancellor’s ideal… to feel much sympathy for where he has ended up”.

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