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28 October 2015

What was the “constitutional crisis” over tax credits?

The short answer: the House of Lords voted to delay tax credit cuts. And the long answer...

By Stephanie Boland

Confused by the fact there was apparently a “constitutional crisis”  but nothing seems to be different, bar the newspapers featuring more photos than usual of George Osborne looking palely furious?

We were too. Here’s what’s going on: on Monday night, the government’s proposal to cut tax credits went to the House of Lords, which, unlike the Commons, does not have a Tory majority (there are 249 Conservative peers, where Labour and the Lib Dems have a combined total of 324).

Two motions passed in the upper house. The first, to give low-income families most likely to be affected by the cuts “full transitional protection” for at least three years, went through 289 votes to 272.

The second, which called for the tax credit cuts to be delayed while the government responded to recent analysis of their likely impact published by the Institute for Fiscal Studies, passed by 307 to 277.

The controversy is thus: while the Lords are empowered to send proposals back to the House of Commons, there is a convention that they don’t block financial legislation – a measure introduced in 1911, after a Tory House of Lords sent back Lloyd George’s budget. Hence Osborne telling the Commons that the rebuff raised “clear constitutional issues”, and Downing Street announcing that it would examine, as the BBC reported, “how to protect the ability of elected governments to secure their business”.

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As our own Stephen Bush explained, though, the tax credits are not a finance bill but rather a “statutory instrument”, meaning the Lords are free to vote on them. This blurs the lines of whether doing so is “unconstitutional” .

So what’s next? There’s two things to look out for: potential reforms to the House of Lords, and Osborne’s response. The key date here is 25 November, when Osborne will present new, revised plans for the cuts in his Autumn Statement.

Until then sit back, relax, and enjoy surviving the “constitutional crisis”.

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