By Sue Jones and Steven Preece
The Government has been hit by TWO embarrassing defeats in the House of Lords, on controversial plans to cut vital tax credits for millions of low-paid working families.
Peers twice defied and ignored Tory threats not to stand in the way of changes to tax credits, voting to force the Government into delaying the cuts and draw up plans for a three-year package of transitional financial help for those affected.
Ministers must also respond to an analysis from the Institute for Fiscal Studies, showing that three million families would be left more than £1,000 a year worse off as a result of the changes.
However, the House of Lords chose not to support a so-called “fatal motion” tabled by the Liberal Democrat Peer Baroness Manzoor by 310 votes to 99, which if successful would have killed off the cuts completely.
Labour Peers chose not to vote, sparking a furious response from both the Liberal Democrats and SNP leader Nicola Sturgeon, and instead supported a less serious motion tabled by crossbencher Lady Meacher – refusing to support the cuts in their current form and calling on the Government to respond to the analysis from the IFS.
I’m no fan of the House of Lords but, if you are a Labour peer, why would you abstain in a vote to stop tax credit cuts?
— Nicola Sturgeon (@NicolaSturgeon) October 26, 2015
Peers also backed the motion put forward by the former Labour minister Lady Hollis, by 289 to 272 votes. This could have far-reaching consequences and halts the cuts until the Government creates a scheme to compensate low-income families for three years.
John McDonnell MP, Labour’s Shadow Chancellor, said: “The Government have suffered a huge blow in the House of Lords tonight on Tax Credits and have only held on by their finger tips in the House of Commons on the Finance Bill – the Tories are in utter disarray.
“The Chancellor needs to understand that cutting on average £1,300 a year from over 3 million working families is not a sensible plan, and people are waking up to what Labour has been warning on this for months.
“George Osborne needs to now go away, and consider the only reasonable option open to him. If he u-turns fairly and in full on his tax credit cuts then I will support him on it, and so will the public.
“But if he continues down his path of tax cuts for the rich paid for by Tax Credit cuts for many hardworking families, then he will be putting the interests of his party before the interests of those working families who just want to pay their bills and get to the end of each month.”
Liberal Democrat Leader Tim Farron said: “The government has been forced into an embarrassing climb down. George Osborne must now go back to the drawing board and come back with plans to balance the books that don’t simply attack working families who are already struggling to get by.
“We have sent a clear signal to the Tories that the British people will not accept this scale of attack on the vital support they need.
“Tonight’s vote gives people hope, but the threat still looms large.
“It is utterly depressing that Labour did not join with the Liberal Democrats to kill off the cuts to Tax Credits completely.
“We support the delay in the proposals and the demand for transitional protection, but this alone won’t stop the Conservative’s attack on working families who rely on Tax Credits, or ensure that it really does pay more to be in work than remain on benefits.
“The Liberal Democrats will continue to do all we can stop tax credit changes that disproportionately hurt low-earning families, and urge others to do the same.”
Plans to cut tax credits we’re not expressly included in the Conservative Party manifesto, allowing the House of Lords to challenge the changes, and David Cameron has previously promised not to touch tax credits.
The Government has now accused the House of Lords of breaking constitutional convention, a claim rejected by Peers who put forward today’s amendments.
Speaking to the BBC, Chancellor George Osborne said: “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 is precisely what I intend to do. I believe we can achieve the same goal of reforming tax credits, saving the money we need to secure our economy while at the same time helping in the transition. That is what I intend to do at the autumn statement.”
Labour’s shadow Lords leader Baroness Smith expressed her regret that the focus of the debate had been largely on the constitution rather than the people affected by the changes.
She said there is “no constitutional crisis at all”, saying peers will not exceed their powers but will also not be cowed in their responsibility to hold the government to account.
Fears the Government could use “financial privilege” to circumvent today’s votes in the House of Lords have been alleviated by the Clerk of the Parliaments, who has confirmed that Commons financial privilege does not extend to ‘statutory instruments’.