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Tax credits: Lords vote to delay controversial cuts Tax credits: Lords vote to delay controversial cuts
(35 minutes later)
The government has been dealt a major blow after the House of Lords voted to delay tax credit cuts and to compensate those affected in full.The government has been dealt a major blow after the House of Lords voted to delay tax credit cuts and to compensate those affected in full.
Peers voted by 307 votes to 277 to pause the cuts until an independent study of their impact is carried out. Peers voted by 289 votes to 272 to provide full financial redress to the millions of recipients affected.
They inflicted a second defeat by backing Labour calls for a three-year plan for financial redress. They earlier inflicted a second defeat by backing a pause until an independent study of the impact is carried out.
Ministers had said they would listen "very carefully" to concerns but insisted the changes should go ahead. Ministers had said they would listen "very carefully" to concerns, but insisted the changes should go ahead.
The BBC's political editor Laura Kuenssberg said it was a "very bad result" for the government but, with the Treasury yet to respond, it was not clear what it meant for recipients of tax credits.
'Powerful message'
On a dramatic evening in the House of Lords, peers threw out a "fatal motion" tabled by the Lib Dems, which would have blocked the changes entirely.On a dramatic evening in the House of Lords, peers threw out a "fatal motion" tabled by the Lib Dems, which would have blocked the changes entirely.
If it had passed, the Lib Dem motion would have stopped the £4.4bn cuts to tax credits in their tracks and sent the proposals back to the drawing board.If it had passed, the Lib Dem motion would have stopped the £4.4bn cuts to tax credits in their tracks and sent the proposals back to the drawing board.
But peers backed calls for the cuts to be put on hold pending an independent analysis, and also supported, by 289 votes to 272, a Labour plan to provide transitional financial support for the millions of recipients of tax credits likely to be affected. But peers backed calls, by 307 votes to 277, led by crossbench peer Baroness Meacher for the cuts to be put on hold pending an independent analysis.
They also supported a Labour plan to provide transitional financial support for at least three years for those likely to be affected.
Baroness Meacher told Sky News that the government was "pulling the rug" from under the feet of working people, saying the outcome sent a "powerful message" to MPs to think again.
Ministers argued peers did not have the right to block financial measures approved by the House of Commons, with Lords leader Baroness Stowell telling them the "financial primacy" of the Commons had been in place for 300 years and to ignore this would be an "unprecedented" challenge.Ministers argued peers did not have the right to block financial measures approved by the House of Commons, with Lords leader Baroness Stowell telling them the "financial primacy" of the Commons had been in place for 300 years and to ignore this would be an "unprecedented" challenge.
'Economic vision''Economic vision'
Urging peers to reject the critical motions, she said the squeeze on tax credits should not be treated "in isolation" but was part of the government "economic strategy and vision for the country". Urging peers to reject the critical motions, she said the squeeze on tax credits should not be treated "in isolation" but was part of the government's "economic strategy and vision for the country".
She said Mr Osborne would "listen very carefully" if a separate motion of regret put forward by Church of England bishops, which would not block the cuts, was passed by the Lords.She said Mr Osborne would "listen very carefully" if a separate motion of regret put forward by Church of England bishops, which would not block the cuts, was passed by the Lords.
But former Conservative Chancellor Lord Lawson urged "tweaks" to the policy to reduce the "financial harm" to those on the lowest incomes, saying "it is not just listening which is required but change". But speaking during a three-hour debate, former Conservative Chancellor Lord Lawson urged "tweaks" to the policy to reduce the "financial harm" to those on the lowest incomes, saying "it is not just listening which is required, but change".
What are tax credits and what are the changes?What are tax credits and what are the changes?
Tax credits are a series of benefits introduced by the last Labour government to help low-paid families. There are two types: Working Tax Credit (WTC) for those in work, and Child Tax Credit (CTC) for those with children.Tax credits are a series of benefits introduced by the last Labour government to help low-paid families. There are two types: Working Tax Credit (WTC) for those in work, and Child Tax Credit (CTC) for those with children.
Under government proposals, the income threshold for Working Tax Credits - £6,420 - will be cut to £3,850 a year from April.Under government proposals, the income threshold for Working Tax Credits - £6,420 - will be cut to £3,850 a year from April.
In other words, as soon as someone earns £3,850, they will see their payments reduced. The income threshold for those only claiming CTCs will be cut from £16,105 to £12,125.In other words, as soon as someone earns £3,850, they will see their payments reduced. The income threshold for those only claiming CTCs will be cut from £16,105 to £12,125.
The rate at which those payments are cut is also going to get faster. Currently, for every £1 claimants earn above the threshold, they lose 41p. This is known as the taper rate. But from April, the taper rate will accelerate to 48p.The rate at which those payments are cut is also going to get faster. Currently, for every £1 claimants earn above the threshold, they lose 41p. This is known as the taper rate. But from April, the taper rate will accelerate to 48p.
There will be similar reductions for those who claim work allowances under the new Universal Credit.There will be similar reductions for those who claim work allowances under the new Universal Credit.
Read more:Read more:
Opponents of the tax credit changes say they will leave millions of existing recipients - many of whom work but are on low incomes - some £1,300 a year worse off when they come into effect in April.Opponents of the tax credit changes say they will leave millions of existing recipients - many of whom work but are on low incomes - some £1,300 a year worse off when they come into effect in April.
But ministers say that taking into account other changes, such as the introduction of the new national living wage, further increases in the personal tax allowance and an extension of free childcare, the majority of existing claimants will be better off.But ministers say that taking into account other changes, such as the introduction of the new national living wage, further increases in the personal tax allowance and an extension of free childcare, the majority of existing claimants will be better off.
The measures have been approved on three occasions by the Commons since June but there has been growing unease on the Conservative benches about their impact and the government is more vulnerable to defeats in the House of Lords, where it has no majority. The measures have been approved on three occasions by the Commons since June, but there has been growing unease on the Conservative benches about their impact and the government is more vulnerable to defeats in the House of Lords, where it has no majority.
Baroness Manzoor's so-called "fatal motion", a rarely used parliamentary device, would have "declined to approve" the plans.Baroness Manzoor's so-called "fatal motion", a rarely used parliamentary device, would have "declined to approve" the plans.
She said the effect of the cuts would be "devastating" and attempts to put them on hold or seek to alleviate their impact would merely be a "sticking plaster".
Constitution warsConstitution wars
It should not really be much of a problem - the House of Lords is not traditionally supposed to block financial legislation that has the backing of MPs.It should not really be much of a problem - the House of Lords is not traditionally supposed to block financial legislation that has the backing of MPs.
This principle was established in 1911 during the constitutional gridlock that followed a decision by peers to block the Liberal Party's "people's budget".This principle was established in 1911 during the constitutional gridlock that followed a decision by peers to block the Liberal Party's "people's budget".
But nothing is ever cut and dried in Britain's fluid, unwritten constitution. And both sides are angrily trading precedents and claiming that their opponents are overstepping the mark. If they could only agree where the mark is.But nothing is ever cut and dried in Britain's fluid, unwritten constitution. And both sides are angrily trading precedents and claiming that their opponents are overstepping the mark. If they could only agree where the mark is.
Lords v Commons: Tax credit battle gets constitutionalLords v Commons: Tax credit battle gets constitutional
The Lib Dems told their 111 peers to vote for the motion but it did not attract support from Labour and the 176 crossbench members of the Upper House.The Lib Dems told their 111 peers to vote for the motion but it did not attract support from Labour and the 176 crossbench members of the Upper House.
Labour's motion, under the name of Baroness Hollis, calls for the changes to be delayed until a three-year package of transitional financial help has been agreed upon. Labour's motion, under the name of Baroness Hollis, called for the changes to be delayed until a three-year package of transitional financial help has been agreed upon.
'Bullying''Bullying'
She said that under her proposal, the cuts would initially apply to new claimants only and could be "implemented next April exactly as planned".She said that under her proposal, the cuts would initially apply to new claimants only and could be "implemented next April exactly as planned".
Two other motions, one under the name of crossbench peer Baroness Meacher calling for a pause, and one from the Bishop of Portsmouth urging further consultation have also been tabled. However, it is not clear if they will be voted on. The Upper House, whose main function is as a revising chamber, has no powers to amend or block government money bills, but the tax credit changes are incorporated in a so-called statutory instrument rather than primary legislation.
Baroness Meacher accused ministers of "bullying" over their attempts to prevent peers from challenging the reforms, saying she was "acutely conscious" of threats by the government to "destroy this House one way or another if we proceed".
The Bishop of Portsmouth, the Right Reverend Christopher Foster, said the cuts were "morally indefensible".
The Upper House, whose main function is as a revising chamber, has no powers to amend or block government money bills but the tax credit changes are incorporated in a so-called statutory instrument rather than primary legislation.
According to parliamentary records, peers have killed off secondary or delegated legislation supported by the Commons on five occasions since 1945: in 1968, 2000 (twice), 2007 and 2012.According to parliamentary records, peers have killed off secondary or delegated legislation supported by the Commons on five occasions since 1945: in 1968, 2000 (twice), 2007 and 2012.
Conservative MP Michael Ellis told Sky News that it was a "constitutional outrage" for the Lords to defy the Commons over the issue, saying it should have "consequences" for the unelected chamber.
Are you receiving tax credits? Have you been affected by any of the issues raised in this story? You can share your comments and experience by emailing haveyoursay@bbc.co.uk.Are you receiving tax credits? Have you been affected by any of the issues raised in this story? You can share your comments and experience by emailing haveyoursay@bbc.co.uk.
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