Government defeat in the Lords puts cuts plans on back-foot

Government minister says Labour and Liberal peers intend to "wreck" the government's austerity programme

THE CONSERVATIVE government's plans to cut back on welfare provision have received a blow after the House of Lords voted to give financial redress to those who would suffer loss of tax credits.

The Lords voted by 289 votes to 272, a margin of just 17 votes, for a Labour motion that would provide full financial redress for three years. Peers also voted for a motion from crossbench peer Baroness Meacher for the cuts to tax credits to be put on hold to allow an independent inquiry to investigate their impact.

The legislation, which had passed three votes in the Conservative dominated Commons, would significantly reduce the income threshold at which tax credits become available to low paid workers, from PS6,420 to PS3,850 a year for Working Tax Credits (WTC) and PS16,105 to PS12,125 a year for Child Tax Credits (CTC).

The changes were expected to leave millions of low-paid people worse off, and critics in the Lords and elsewhere have urged financial assistance for those affected.

Speaking to the BBC Osborne said that the vote raised "constitutional issues" but also said that he understood the legislation in its current form had been defeated: "Tonight Labour and Liberal Lords have defeated a financial matter passed by the elected House of Commons and David Cameron and I are clear that this raises constitutional issues," he said.

Osborne indicated that additional aid to those seeing reductions in their tax credits would be forthcoming: "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 save to secure our economy while at the same time helping in the transition," he said.

Quoted in the Guardian , Chris Grayling, the Conservative leader of the House of Commons said that the Lords was acting to "wreck" the government's austerity plans: "I think this is all about Labour and Liberal Democrat peers in the Lords who are unhappy that they lost the election - the Lib Dems have eight MPs and 100 peers - deciding they want to wreck the government's programme," he said.

The tax credits system, which is intended to help those on lower earnings, was introduced under the last Labour government. A Liberal motion in the Lords to scrap the tax credit cuts outright failed to garner enough votes.

Picture courtesy of ukhouseoflords