It’s the Constitution, Stupid!

Well last night was a pretty sobering night for George Osborne.  The bill setting out the reduction in the income threshold at which tax credits can be claimed was dealt a serious blow in the House of Lords this evening.  The Government was defeated on two votes; one to pause introduction until an independent study on the impact of the cuts has been carried out; and one to provide financial assistance to those set to lose out. For those receiving tax credits, who on average stood lose £1300, last night’s proceedings will come as a relief.

Many commentators (I’m sure encouraged by Conservative MPs, to deflect from the damage done by the defeat) were discussing the possibility that a constitutional crisis could ensue because the Lords voted against a financial measure. This is despite parliamentary convention stating that the House of Commons has primacy when it comes to matters of taxation and expenditure, a convention dating back to the 1911 Parliament Act.  However, the Tories tried to pass the legislation using a device called a statutory instrument, to ease its passage through parliament and avoid the level of scrutiny that would normally apply, instead of either including it with the rest of the July 2015 Budget measures, which would have ensured that it passed, or using a separate bill to introduce it, which would have delayed the changes but which would have avoided defeat in the upper house.

Since 2000, the Lords have defeated statutory instruments on four occasions.  On this occasion they argue (and rightly so, in my opinion) that because the Conservative Party manifesto only alluded to £12bn in welfare cuts and didn’t specifically mention the cut in tax credits, the Salisbury-Addison convention, under which the Lords agree to allow manifesto commitments to pass, did not apply in this instance.

The protestations from Cameron, Osborne and other cabinet members about the Lords overreaching are sure to ring hollow. The very nature of this piece of legislation and its impact on those receiving tax credits was sure to attract interest from the House of Lords.  Indeed, the level of discomfort on display on the Government benches was enough to convince them that it may be wise to give Cameron and Osborne a chance to reconsider the measure.  Former Conservative chancellor Nigel (now Lord) Lawson was also encouraging the Government to rethink.

So what now? As I mentioned earlier, it will suit the Government to move the argument on to one about the Lords abusing their constitutional position, as opposed to focusing on a very public rebuke on a key piece of legislation.  To ensure that this fiasco doesn’t happen again and that future legislation passes smoothly, the Government could flood the upper house with a raft of Conservative peers, where they are currently in a minority.  Quite apart from the constitutionality of such a move, it would be particularly controversial as it would be seen as appointing peers in order to take money from poor people.  The Government could also introduce legislation that would only allow the Lords to delay legislation for a period of 3-6 months.  Another option may be to go back to the Commons and introduce the tax credit measure in a bill, which the Lords would ultimately pass.

It will certainly be interesting to watch developments over the next few weeks, particularly with the chancellor’s autumn statement coming up at the end of November. While the Tories will be seething this morning, the Lords may have done them a favour in the long run and actually saved them from themselves.  In 2020 very few will remember this, but they would surely remember losing £1300.