November 3, 2015

House of Lords Delay Tax Credit Cuts

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The House of Lords delay tax credit cuts

On the 26th of October 2015 the House of Lords blocked the passage of the Conservatives’ controversial tax credit cuts.

The Tories planned to cut tax credits, which were introduced by Browns Labour Government, by £4.4 billion by 2020. Much opprobrium was cast upon the Conservatives as the cuts seemingly hurt the poorest of society.  The Conservatives claimed the fall in income to families no longer receiving tax-credits would be offset by the increase in minimum wage and decreasing child care costs, however many studies would suggest otherwise. The Child Poverty Action Group listed professions that, they predicated, would see a fall in income such as a nursery nurse (-£1,788), a care worker (-£1,906) and a hospital porter (-£2,011). The Institute for Fiscal Studies warned that by cutting tax credits in the UK the government risked worsening inequality ‘during a workers’ lifetime’.

See our article on whether the living standards of British people will increase following the increase of the national living wage

Peers voted to provide full financial redress to the millions of people who could be affected by the cuts while also backing a pause of the bill until an independent study of the potential impact was carried out, which could take 3 years.

Tory backbencher Edward Leigh said that “not for 100 years has the House of Lords defied this elected House”.

George Osborne, Chancellor of the Exchequer, argued the decisions made by the Lords raised “constitutional issues”. Osborne is referring to the constitutional convention that the House of Lords cannot block/delay financial bills from the elected lower chamber.

Having blocked the passage of the cuts, questions are being asked as to whether the Lords have overstepped their constitutional boundaries. Being the un-elected house do they have the right to block the elected chamber?

Those in favour of the Lords decision will point out that both David Cameron (in Question Time) and Michael Gove promised that the Conservative government would not cut tax credits, and thus the Conservatives could be argued to be lacking a mandate from the people. The Lords argue they are representing the public interest as the majority are seemingly against the cuts. However, the un-elected nature of the Lords means the blockage of legislation from elected politicians could be in itself un-democratic.

So what happens next?

David Cameron could, in theory, pack the House of Lords with Conservatives (the Lords having no limit on the number of peers). This would give the Conservatives a majority in the Lords and thus allow them to pass the cuts. However, there would be a significant and possibly fatal media backlash if Cameron pursues that route.

There is also a growing argument that the Lords should become elected. This would, arguably, be the biggest constitutional change in the UK since the signing of the Magna Carta in 1215. Undoubtedly an elected Lords would be subject to more democratic accountability but do we want a system of government mirroring America’s House and Senate? Where gridlock between the two elected chambers is the antecedent to maladministration.

What seems most likely is that George Osborne will modify the cuts and simply try again. Osborne speaking on Tuesday the 27th October said the effects on families would be considerably lessened while still emphasising the need to “save the money needed so that Britain lives within its means.”