6 things to know about the Lords tax credit debate

Chancellor George Osborne
Chancellor George Osborne
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The Government’s controversial plan to slash tax credits could be stopped in its tracks today, with a debate in the House of Lords due to start this afternoon. This rare flexing of peers’ muscles has ruffled Conservative feathers as they don’t have a majority in the Lords and could see their plan defeated.

1) What’s the debate about?

The Government’s changes to tax credits. Chancellor George Osborne wants to save £4bn by reducing child tax credits and working tax credits which could make families up to £1300 worse off a year. Two debates in the House of Commons have so far seen the plan passed, but there is vehement opposition and there’s hope from the Lib Dems and and Labour peers that they might be able to stop it proceding to law.

2) Are the Lords overstepping the mark?

The Conservatives certainly think so. On matters of finance, it’s been accepted hisorically that the House of Lords does not interfere with the House of Commons, however the tax credits plan is not part of a finance bill. Furthermore because the Lib Dems say the tax credit plan wasn’t in their manifesto they are well within their rights to call what’s known as a ‘fatal motion’ and kill off the proposal.

3) So what are the Lords voting on today?

Peers are going to be in and out of those voting lobby doors A LOT today. First there’s the Lib Dem fatal motion, and then potentially three others to consider. Crossbencher Baroness Meacher wants the Government to consider the Institute for Fiscal Studies report that families would be £1300 worse off a year on average before the plan gets peer support. Labour’s Baroness Hollis will put forward a motion which means peers won’t back the bill until the Government puts in place transitional measures to protect existing recipients for three years. The Bishop of Portsmouth has added a ‘regret motion’, which would pass the Government’s measures but ask ministers to note their concern. This won’t be put forward if Baroness Hollis’ vote is passed.

4) Whose will win?

The Lib Dems have laid down the toughest challenge to the Conservatives. They have 70 peers likely to turn up out of a total of 112 member, but without Labour (213 members) and cross-bencher (176) help they will struggle to get this passed. A more likely outcome is that peers rally around Baroness Hollis’ motion. This has greatly upset some Lib Dems who can’t understand how in the Commons Labour were dead against tax credit changes, but in the Lords their only offer has been a delay, therefore a sign that there’s still acceptance the general principle of reducing the benefit albeit with protective measures.

5) The great unknown

It’s much harder to know how peers will vote in the Lords as there’s no strict whipping system and also who will turn up as there are many elderly members who don’t vote regularly. There’s really no clarity over numbers. The Conservatives are panicking however and have asked for their members to break from half-term plans and make sure they definitely turn up to boost their side. They have 249 members and are easily outnumbered if Labour and the Lib Dems team up. The Libs would naturally like everyone to back their motion, which won’t happen, however they are understood to have told members to lend their support to Hollis.

6) What next?

If Baroness Hollis’ motion passes, the Government has to go back to the drawing board and present a new plan to be voted on by the Lords.

There’s another tax credits debate in the Commons later this week however. If it passes for a third time, then George Osborne will no doubt use that as ultimate proof that in the directly elected house, the plan has clear support. This really is a question of constitutional nerve.