26 Oct 2015

Tax credits: Labour and Lib Dems mount challenge

Labour and the Liberal Democrats will try to use the House of Lords to block government plans to cut tax credits.

Cabinet Office Minister Mathew Hancock said Chancellor George Osborne is in “listening mode” over the plans as he attempts to kill off any challenge in the House of Lords.

The Chancellor’s plans will cut £4.4bn from working tax credit and child tax credit for some of the country’s poorest households.

Figures show that more than three million families will lose an average of £1,300 a year from April if the tax credit cuts go through.

But Mr Hancock said eight out of 10 families would be “better off” overall from a package which also includes increases in the minimum wage for over-25s, rises in the income tax threshold and extended free childcare.

The Institute for Fiscal Studies says higher wages will make up for only a fraction of the loss of income.

The government is more vulnerable to defeats in the House of Lords, where it has no majority. But ministers say that peers do not have the right to block financial measures approved by the House of Commons.

‘Listening mode’

Speaking to BBC Radio 4’s Today programme, Mr Hancock warned that a vote by peers to block the changes could take parliament down an “unprecedented constitutional path”.

“George is very much in listening mode and the peers this afternoon have the opportunity through a motion put down by the Bishop of Portsmouth to express regret at this measure without breaking these constitutional conventions.

“I hope that they don’t, I hope they support the measures, because they are part of a package to get this country to live within its means and to support work and to support people getting into work, and I think that they are important.”

Fatal motion

Labour have tabled a motion calling for a delay in the reforms while a package of financial assistance is drafted. The Lib Dems have gone further, tabling a “fatal motion” which would kill off the cuts altogether.

Liberal Democrat leader Tim Farron said his party would back Labour’s delaying motion if its own motion to block the cuts was defeated.

Mr Farron told the BBC Radio 4 Today programme: “We will of course support the other motion, which would delay the changes, because that is better than nothing.

“But we think it is right to use the mechanisms available to us to overturn this proposal, which will damage so many families, which is unfair, which is a disincentive to work and which they have no mandate for.”

Labour work and pensions spokesman Owen Smith told Today: “If we were to win on our motion, then the Conservatives would need to go away, think again and come back with some proposal for transitional arrangements in order to mitigate the worst effects of these cuts.”