Osborne accused by peer of bullying in row over tax credits

The Chancellor is under mounting pressure to mitigate the effect of the policy, with opposition parties and rebel Tory MPs threatening defeats in the Lords and Commons next week.

Threats to throw out the £4.4 billion cuts sparked warnings from David Cameron that peers should obey the convention that the House of Lords does not block financial policies approved by MPs.

The Prime Minister pointedly failed to rule out appointing hundreds of new Conservative peers to give the party a majority in the second chamber.

Crossbencher Baroness Meacher complained at the way she and others were treated over proposed “fatal” amendments that would kill off the policy.

“There has been enormous pressure coming from the Treasury, the Chancellor of the Exchequer, upon peers,” she told BBC Radio 4’s Week in Westminster.

“The weight on me has been unspeakable really. I think it’s bullying tactics.”

Threats included that he would “close the House of Lords, that he will create 100 new Conservative peers”, she told the programme.

Mr Osborne insisted this week he was “comfortable” with the policy despite analysis by the independent Institute for Fiscal Studies (IFS) that the introduction of a higher minimum wage will not offset poor households’ immediate losses.

The IFS calculates that millions of people will lose up to £1,300 a year from the Budget changes.

But with the Lords set to make its opposition known - perhaps via a Church of England bishops’ motion decrying the failure to take into account the short-term impact - and senior Tory MPs leading a rebellion in a vote in the Commons later in the week, there are reports concessions may be made.

Meanwhile, UK proposals to cut tax credits will have “heart-breaking long-term consequences”, a Scottish Government minister has said as he urged a rethink on the proposals.

Social Justice Secretary Alex Neil has written to Iain Duncan Smith telling him tax credits were worth about £2 billion to Scottish households in 2013/14, with two-thirds of support directed at low-income working families.

In the letter to the Work and Pensions Secretary, Mr Neil said: “Cutting tax credits is a thoughtless approach which may save the Treasury money in the short-term but will have heart-breaking long-term consequences that could rebound on other public and charitable services.

“Tax credits can be a lifeline for families on low incomes that rely on them to get through daily life, put food on the table, heat their home and pay their bills.

“Removing this vital support from thousands of families will widen the gap in inequalities and push even more people into poverty.

“The UK Government’s plans are a clear attack on low-income working families and those families must be protected as a matter of urgency.

“The Scottish Government has made clear its opposition to these changes and I urge the UK Government to reconsider the severity and timing of these changes and make changes before the Welfare and Work Bill reaches its next legislative stage, so that the poorest households in receipt of tax credits can be protected from this fall in their incomes.

“This shows why we need more social security powers through the Scotland Bill and why we will ensure our approach to social security will be based on fairness and that people are treated with dignity and respect.”

The SNP group at Westminster has appealed to Labour and Conservative MPs to vote against the bill when it returns to the House of Commons on Tuesday.

The party’s Westminster spokesman for fair work and employment Neil Gray said: “Children living in low-income families will be hit the hardest by the Tories’ ideological austerity agenda but even on the government benches there are people who are realising the devastating impact these cuts will have.

“When the Welfare Reform and Work Bill returns to the House of Commons on Tuesday we have one last chance to stop these cuts and the SNP are appealing to both Labour and Tory MPs about the impact these cuts will have on their constituents and vote against the bill.”