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The Guardian view on tax credit cuts: the Lords should send them back The Guardian view on tax credit cuts: the Lords should send them back
(about 5 hours later)
The coming cuts to tax credits will punish children, hammer the poor and reduce the rewards of working. Three powerful objections, and yet none is the principal reason why David Cameron and George Osborne are suddenly in choppy waters. No, they are instead in trouble because of a double deceit. First, just before polling day, the prime minister agreed on national TV to “put to bed” rumours of a cut in the credit for families, insisting that “it’s not going to fall”. Second, when – just a few weeks later, with the election won – George Osborne duly unveiled far deeper cuts than anybody had envisaged, the impression created was that what was being lost in degrading government handouts would be made good by a surprise hike in the minimum wage. It was an arresting story, but one which has slowly got snared on the spike of the truth.The coming cuts to tax credits will punish children, hammer the poor and reduce the rewards of working. Three powerful objections, and yet none is the principal reason why David Cameron and George Osborne are suddenly in choppy waters. No, they are instead in trouble because of a double deceit. First, just before polling day, the prime minister agreed on national TV to “put to bed” rumours of a cut in the credit for families, insisting that “it’s not going to fall”. Second, when – just a few weeks later, with the election won – George Osborne duly unveiled far deeper cuts than anybody had envisaged, the impression created was that what was being lost in degrading government handouts would be made good by a surprise hike in the minimum wage. It was an arresting story, but one which has slowly got snared on the spike of the truth.
The Disraelian audacity of a Tory chancellor dishing the Labour party on low pay distracted Westminster. But a few dissident voices on the day, including the Guardian, pointed out that the promised wage rise would not redeem the tax credit losses, because it would go to the wrong people, on the wrong timetable, and was on an inadequate scale. The government’s own budget analysis of the winners and losers was plainly slippery, offering not a straightforward table of budget-day gainers and losers but a vaguer, more flattering picture of the relative fortunes of rich and poor over a far longer period, dating back to 2007. Messrs Osborne and Cameron initially brushed away every concern with an effective soundbite: “low tax, low welfare, and higher pay”.The Disraelian audacity of a Tory chancellor dishing the Labour party on low pay distracted Westminster. But a few dissident voices on the day, including the Guardian, pointed out that the promised wage rise would not redeem the tax credit losses, because it would go to the wrong people, on the wrong timetable, and was on an inadequate scale. The government’s own budget analysis of the winners and losers was plainly slippery, offering not a straightforward table of budget-day gainers and losers but a vaguer, more flattering picture of the relative fortunes of rich and poor over a far longer period, dating back to 2007. Messrs Osborne and Cameron initially brushed away every concern with an effective soundbite: “low tax, low welfare, and higher pay”.
But as MPs got wind of just how many “hard-working” constituents would soon lose hundreds or thousands of pounds, the spell of the rhetoric wore off. A more specific “line to take” was devised – namely that there was a broad package here, which needed to be considered in the round, factoring in childcare schemes, the tax-free allowance, and sometimes even signs of average pay inching off the ground. These claims were shamelessly arbitrary. If the government wants to factor its personal allowance rises into the equation, then shouldn’t the VAT hike also be included? And how can 2015’s pay awards be factored into the picture, while taking no account of the sharpest pay squeeze since the 1860s during the five years before? By the time the Institute for Fiscal Studies gave its belated verdict, that only a quarter of the tax credit losses would be made good by Mr Osborne’s misnamed “national living wage”, the budget day magic was revealed as smoke and mirrors.But as MPs got wind of just how many “hard-working” constituents would soon lose hundreds or thousands of pounds, the spell of the rhetoric wore off. A more specific “line to take” was devised – namely that there was a broad package here, which needed to be considered in the round, factoring in childcare schemes, the tax-free allowance, and sometimes even signs of average pay inching off the ground. These claims were shamelessly arbitrary. If the government wants to factor its personal allowance rises into the equation, then shouldn’t the VAT hike also be included? And how can 2015’s pay awards be factored into the picture, while taking no account of the sharpest pay squeeze since the 1860s during the five years before? By the time the Institute for Fiscal Studies gave its belated verdict, that only a quarter of the tax credit losses would be made good by Mr Osborne’s misnamed “national living wage”, the budget day magic was revealed as smoke and mirrors.
Related: Lords forced to back down on tax credits motion as Tory rebellion grows
With little in the Osborne strategy, beyond the immediate minimum wage rise, to foster an enduring shift to a high-investment, high-pay economy, the chancellor was beginning to lose the argument. In parliament, however, he still looked secure. For he had chosen to ram the tax credit cuts through in regulations, which aren’t subject to the same line-by-line Commons scrutiny as legislation, but instead stand or fall on a single quickfire vote; there was only a tiny Tory rebellion when it came. But by keeping tax credit cuts out of the finance bill, Mr Osborne also forswore the “money bill” exemption: regulations must go through the Lords. And after a lively opposition debate in the Commons on Tuesday revealed Tory unease, most memorably in Heidi Allen’s maiden speech, Labour, Lib Dem and crossbench peers are mulling a “fatal motion” to send the plans back to the drawing board.With little in the Osborne strategy, beyond the immediate minimum wage rise, to foster an enduring shift to a high-investment, high-pay economy, the chancellor was beginning to lose the argument. In parliament, however, he still looked secure. For he had chosen to ram the tax credit cuts through in regulations, which aren’t subject to the same line-by-line Commons scrutiny as legislation, but instead stand or fall on a single quickfire vote; there was only a tiny Tory rebellion when it came. But by keeping tax credit cuts out of the finance bill, Mr Osborne also forswore the “money bill” exemption: regulations must go through the Lords. And after a lively opposition debate in the Commons on Tuesday revealed Tory unease, most memorably in Heidi Allen’s maiden speech, Labour, Lib Dem and crossbench peers are mulling a “fatal motion” to send the plans back to the drawing board.
There is some nervousness, stoked by Ken Clarke on Tuesday when he said “we don’t want to reopen 1911”. And indeed, unelected peers will be understandably nervous about rewriting budgets, where they were traditionally cautious even before 1911. But a century on, the Lords are considering not a people’s budget, but a budget to impoverish very vulnerable people. They should steel their nerve. Mr Cameron had the chance to reform the upper house, and deliberately blew it. He could have pledged to the cuts before the election in his manifesto, and then the Salisbury convention would have required the Lords to nod them through; as it is, he pledged the opposite, and so the Salisbury logic runs the other way. Mr Osborne could have put his provisions into statute, but he preferred regulations. And both of them have made their case with considerable sleight of hand. The upper house should be elected. While it is not, it can best justify its dubious place in constitutional theory by demanding proper process, sharper scrutiny and better policy in practice. That means sending Mr Osborne’s tax credit cuts back for a rethink.There is some nervousness, stoked by Ken Clarke on Tuesday when he said “we don’t want to reopen 1911”. And indeed, unelected peers will be understandably nervous about rewriting budgets, where they were traditionally cautious even before 1911. But a century on, the Lords are considering not a people’s budget, but a budget to impoverish very vulnerable people. They should steel their nerve. Mr Cameron had the chance to reform the upper house, and deliberately blew it. He could have pledged to the cuts before the election in his manifesto, and then the Salisbury convention would have required the Lords to nod them through; as it is, he pledged the opposite, and so the Salisbury logic runs the other way. Mr Osborne could have put his provisions into statute, but he preferred regulations. And both of them have made their case with considerable sleight of hand. The upper house should be elected. While it is not, it can best justify its dubious place in constitutional theory by demanding proper process, sharper scrutiny and better policy in practice. That means sending Mr Osborne’s tax credit cuts back for a rethink.