Government defeated twice on tax credit cuts in House of Lords

Lords voting

I doubt there’s a single person on low pay that is happy about the Conservative proposals to cut their tax credits and subsequently, their living standards, further. Today, research by welfare reform group Policy in Practice comes as peers prepare to debate George Osborne’s proposals, and it concludes that two-thirds of working tax credit recipients will be worse off in 2020.

The tax credit cuts were deliberately left out of the Tory manifesto, and when asked directly if his government was going to cut tax credits, Cameron chose to lie and said no. Now the Conservatives are claiming that this policy, never declared before the election, is somehow a “central plank” of the budget. The claim that Conservatives had previously declared cuts to welfare doesn’t stand up to scrutiny, either, because they did not specify what cuts they would make, despite being asked several times, and they claim to be a party that is all about “making work pay”. 

The Conservatives are claiming that the cuts were “democratically voted” through in the House of Commons, yet their majority in the lower House may not have happened at all, had they been honest prior to the election and declared their intention to cut people’s tax credits. 

The threats issued to the Upper House from the government arose  because the Conservatives are facing defeat on what is an extremely unpopular reform, even amongst their own party ranks, and are truly remarkable, showing a contempt for democratic process and a lack of willingness to engage in genuine, transparent democratic dialogue.

Earlier this year, the Institute for Fiscal Studies (IFS) asked George Osborne to specify how he will reach targets announced in the budget, given that the poorest had been the hardest hit by draconian benefit cuts already. The IFS said that the worst of the UK’s spending cuts are still to come.

I said at the time that it’s not that Osborne can’t answer the IFS challenge: he won’t.

David Gauke, the Treasury secretary at the time was pressed repeatedly on the BBC’s Daily Politics to explain if the Tories would detail their planned welfare cuts beyond the £3billion previously specified.

He replied: “We will set it out nearer the time which will be after the election.”

Pre-general election television comments have exposed Prime Minister David Cameron’s lies about his party’s proposal to reduce child tax credits. During a special episode of BBC’s Question Time, aired in April, presenter David Dimbleby asks: “There are some people that are worried about you cutting child tax credits, are you saying absolutely as a guarantee that you’d never have it?”

To which the Prime Minister responds: “First of all child tax credit we increased by 450 pounds …” Dimbleby interjects: “And it’s not going to fall?” to which the PM clearly replies: “It’s not going to fall.”

It’s therefore a bit much to hear lectures on democratic process from a government that was so dishonest to the electorate before the election.

Following an impassioned, powerful and eventful three-hour debate, the Lords voted by 289 votes to 272 – a majority of 17 – for low-income families to be given “full transitional protection” from the cuts for at least three years.

They also supported a motion by 307 votes to 277 – a majority of 30 – calling for the cuts to be delayed until the Government responds to analysis of their impact by the Institute for Fiscal Studies and considers “mitigating action”.

Lord Campbell observed in the House of Lords Tax credit debate today that because of the Conservatives pre-election lies, and because the public were deliberately misled by several statements saying there would be “no cuts to tax credits,”  that “constitutional convention and niceties are not a priority.”

There are three separate motions from the Liberal Democrats, Labour and the crossbenchers presented to the Peers, calling for the cuts to be either scrapped or paused and re-scrutinised after further evidence has been gathered. The Liberal Democrats want to completely scrap the changes, which is a risky tactic that many have deemed a “fatal motion.” Labour are seeking to delay the changes, so that the Commons may re-scrutinise them in light of new evidence, and respond to that evidence, to mitigate the impact on the poorest, and crossbencher, Lady Meacher, is also calling for a delay in the cuts.

During the Lords debate, Baroness Smith said that 60% of the population want to see a u-turn on this policy. She also points out that the original Labour tax credit legislation wasnt subject to financial privilege. She said that the government truncated the legislative process to introduce a wide reaching and radical change of policy, to avoid a degree of scrutiny. Baroness Hollis urged peers to support the working poor, not government. She argued that the Commons votes were taken based on incomplete evidence. Her very powerful speech was delivered to a completely silent Upper House.

Labour’s shadow Lords leader Baroness Smith expressed her regret that the focus of the debate has been largely on the constitution rather than the people that will be affected by the changes.

She said there is “no constitutional crisis at all”, and “peers will not exceed their powers but will also not be cowed in their responsibility to hold the government to account.”

The Clerk of the Parliaments has confirmed that Commons financial privilege does not extend to statutory instruments. Many Peers have pointed out throughout the debate that welfare policy isn’t “budgetary.”

Conservative Chancellor Lord Lawson said: “I am torn because I believe there are aspects to these measures which need to be reconsidered and indeed changed. The great harm, or a great deal of the harm, is at the lowest end and that is what needs to be looked at again. That is what concerns me.

I think it is perfectly possible with tweaking it to take more from the upper end of the tax credit scale and less from the lower end of the tax credit scale.”

He also said  “It is not just listening which is required [from the government] but change”.

Baroness Hollis said that the government will save money as a result of the increase in the minimum wage. And by 2019 most tax credit claimants won’t be claiming tax credits because they will be on universal credit. Taken over the course of the parliament, the government will be making savings, “probably exceeding the very cuts the government demands,” she said.

The Reverend Christopher Foster pointed out that wage levels are low and the cuts are likely to have a very negative impact, including raising indebtedness, social injustice, damaged lives, ruining life chances, with detrimental consequences to mental health. He said this government provides  “a carrot for some, a stick for others” .

He went on to say that the cuts to the poorest are morally indefensible – “a punishment, not encouragement”.  He urged a vote in the interests of the poorest workers, saying he was appalled at the government for “masking the issues.” He called for house to clearly express disapproval at the government proposals. He said: “The Bill is not acceptable in its current form.” Like others, he emphasised that the government has moral obligations, and needs to do more than simply meeting fiscal targets.

Conservative Lord Mackay tried to argue a case for Commons financial privilege, as did other Conservative peers, including Lord Tebbit.

Baroness Lister pointed out that no impact assesment was carried out regarding the cuts, and said “the Bill is an example of none evidence-based policy making.”

She said “It betrays a lack of understanding of policy and people’s lives,” and added “getting an impact assessment from the government is like pulling teeth”.

She also pointed out that the cuts will affect protected groups. Carers and disabled people will be negatively impacted, and the self-employed won’t have their losses offset at all by the “living wage.”

She cited the Resolution Foundation research, that finds 200, 000 children, rising to 600,000 by 2020, will be plunged into poverty because of the proposed cuts. She said there is “no adequate defence of policy – lone parents will be hardest hit. Tax allowances and the living wage won’t mitigate the impact.”

She concluded that child tax credits were introduced to address child poverty, and that the Bill penalises hard work. She pointed out that “the House of Lords has a role of scrutinising policy – and this policy doesn’t stand up to scrutiny”.

The first vote was on Liberal Democrat Baroness Manzoor’s amendment to move to the above motion: “to leave out all the words after “that” and insert “this House declines to approve the draft Regulations laid before the House o7 September.”

This would have killed off the legislation, but it was defeated by by 310 votes to 99 – a majority of 211.

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