Peers – including Wigan’s council leader Lord Smith – voted by a majority of 17 to back Labour calls for the cuts to be delayed until chancellor George Osborne can outline a help package for those due to be hit worse by the reforms.
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In the House of Commons, Conservative Party lawmaker Edward Leigh said the rights of legislators are being trampled by the unelected Lords.
He said: “Last night, unelected Labour and Liberal peers voted down the financial measures on tax credits approved by this elected House of Commons – that raises clear constitutional issues which we will deal with”.
“We will continue that approach”, the Prime Minister’s official spokeswoman said.
Full details of this tax credit relief will be announced at the end of November in the chancellor’s Autumn Statement, announced Chris Grayling, leader of the House of Commons.
However, they stopped short of blocking the changes entirely, by rejecting a so-called “fatal motion” tabled by the Liberal Democrats.
Mr Davis said it was “bonkers” that the Chancellor’s plans meant a few low-paid workers losing 93p in every extra pound they earned from taking on extra hours.
Mr Osborne is facing not just dissent from a number of his own MPs and Cabinet colleagues, but also the risk that the reforms could be thrown out by the Lords, where a vote will take place on Monday.
He has also threatened to flood the Lords with Conservative peers – the reason the Government was dished defeat was because there is not a Tory majority in the upper chamber.
But Labour’s former work and pensions minister Baroness Hollis of Heigham urged peers to “keep faith with struggling families” by delaying controversial cuts in tax credits.
However, the plea was ignored wiith concerns that low income families will lose on average £1,300 or 10 per cent of their household incomes as a result of the changes. Besides, the Lords is already too big, as was evident during last night’s vote.
Osborne may seek to smooth the transition, for instance, by reducing the speed at which tax credits cuts are applied.
“So I have said to him, “Look, if you can change your mind on this we will not make any political capital out of this”.
The Chancellor said he would lay out revised plans for the introduction of tax credit changes in the Autumn Statement.
There are suggestions the “rapid review” threat is a distraction from the main event – Mr Osborne and what he’s going to do about tax credits. But I worry that our single-minded determination to run a budget surplus is betraying who we are.
We said very clearly we were going to cut £12billion from welfare.
The reforms were a key component of Osborne’s plan to wipe out Britain’s budget deficit by 2020, and the defeat will likely force an embarrassing re-think – potentially damaging his credentials as a successor to Prime Minister David Cameron.
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In a briefing to journalists following his Fife speech, Mr Farron described the Salisbury convention and second convention that Lords do not block government finance business as “more guidelines rather than exact rules”.
