The embarrassed Chancellor promised to “lessen the impact” of his welfare reform move amid a hail of heckles in the Commons.
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The Conservatives have a majority in the elected 650-seat lower chamber, the House of Commons, but not in the Lords.
Following an impassioned and extensive debate the Lords voted for low-income families to be given “full transitional protection” from the cuts.
Former Cabinet minister William Hague said “it would reflect badly on this country” if changes were not made.
Q. What reforms were peers voting on?
Mr Davis said the public would be “disgusted” by any attempt to stuff the Lords with new Tory peers, dismissing the suggestion as “a ridiculous threat”.
“David Cameron and I are clear that this raises constitutional issues that need to be dealt with”. “A convention exists and it has been broken”, it read.
Councillor Barry Kirby (L, Grange and Kingsway) said the episode surrounding cuts to Working Tax Credits “has done politics a disservice”. He said a possible solution was for the Lords to be given the explicit power to delay or amend secondary legislation in return for foregoing the authority to vote down such measures.
The Liberal Democrats tried to table a “fatal motion” which would have stopped the £4.4 billion cuts, but this was thrown out of the house.
He appealed to the Chancellor to “listen to reason”, saying that he could either push ahead with tax giveaways to multinational corporations and cuts to inheritance tax for the wealthiest few “or he can reverse those tax breaks for the few and instead go for a less excessive surplus target in 2019/20”.
Unison general secretary Dave Prentis said: “Peers have now given the Government a chance to think again, and the Chancellor should grasp that opportunity with both hands”.
Conservatives reacted furiously in the minutes after the Lords’ votes.
But Osborne reiterated that peers have never blocked a financial matter before, meaning yesterday’s vote was unprecedented and will be addressed to reassert the Commons’ primacy over spending-related decisions.
Edward Leigh, the senior Tory backbencher, said: “Not for 100 years has the House of Lords defied this elected House. That is what I intend to do in the autumn statement”. The Bishop of Portsmouth, the Rt Rev Christopher Foster, said: “These proposals are morally indefensible. We would have to borrow more money we don’t have and burden our children with still higher debt”, the finance minister wrote in a Daily Telegraph article this month.
She said reforms to clarify the situation could be agreed but the review should not be used to punish the Lords. The House of Commons is accountable, the House of Lords is not. “It puts us on to a perpetual treadmill”.
The prime minister has urged peers to obey the convention that the second chamber does not block financial policies approved by MPs.
He insisted that Mr Osborne understood the need to make sure the tax credit cuts did not have too much impact on the poorest people in society.
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Lord Strathclyde is the former Conservative leader of the House of Lords.
