26 Oct 2015

Lords debate tax credits: showdown, climbdown or just a distraction?

The Treasury is pulling every lever possible to avoid anything that could be called a U-turn on tax credits. They know the stakes are very high – for the reputation of the government, for its relationship with lower paid workers and for George Osborne himself.


The Chancellor hated the publicity that went with his 2012 “omnishambles” budget and is acutely aware that a massive rewrite of measures worth billions risks making that look like a peccadillo.

One MP speaks of colleagues being offered all sorts of special hand-outs for their constituencies … by-passes, help for a local tv channel were amongst the measures one Tory MP said fellow backbenchers had been promised. “You’ll see them all in the spending review,” the MP said. “I’ll take you down the list.”

There is even talk that the Sun was told via the US to tone down its campaign against the tax credit changes. And around the corridors of Westminster you get some talk worthy of “House of Cards”.

“He’ll kill you, he’ll kill you!” was the warning that one MP tells me has been regularly passed on by an Osborne loyalist minister to Tory MPs thinking of going public in their criticism of the Chancellor’s handiwork on tax credits.

“People are just frightened,” one Tory MP said. He likened the atmosphere of fear to Gordon Brown’s domination of Labour MPs ahead of his succession to the party leadership. That air of menace, the MP said, is “extremely damaging” for the Chancellor.

A not hugely scientific poll of crossbench peers I managed walking around the Lords today suggested that Labour will struggle to get the 20+ non-aligned peers they need to get their motion passed. But one Lords whip says they think that after the Lib Dem “fatal” motion is defeated, one of the other “near fatal” (intensive care)  motions may well pass.

If it doesn’t the Treasury will be alone in the spotlight, not sharing it with a distracting “constitutional crisis” over which house of parliament rules. In some ways that would be a more uncomfortable place for George Osborne to be.

If a “near fatal” motion does pass, the attention will immediately switch to punishment reform for the Lords. It will be difficult to formulate and even more difficult to get passed.

And the problem of the millions who are seriously out of pocket through the tax credit changes will remain … the clock ticking to the autumn statement next month.

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One reader comment

  1. Sophie says:

    What is not being discussed and needs to be addressed is that tax credits are not just about people on low wages. While it is right that the government should not be subsidising companies who pay low wages, in fact many people who claim tax credits are self-employed and will not be helped by an increase in the minimum wage. Many of these people who are self-employed have set up their own businesses in response to losing a job and becoming unemployed, being unable to find a new job and being proactive and setting up their own initiatives. Tax credits are a vital source of support for those who have opted to take this route rather than be on the dole. There is evidence that lower unemployment figures in the Tory’s previous term actually came about through people becoming self-employed not finding employment in new jobs.

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