Lords Force Cameron, Osborne to Delay Tax Credit Cuts

In an unusual demonstration of its power, Britain’s unelected upper chamber delays cuts in tax credits.

Britain’s House of Lords forced the ruling Conservative Party to delay cuts in tax credits on Monday in an unusual demonstration of the unelected upper chamber’s power.

Prime Minister David Cameron’s office censured peers for breaking a century-old convention under which they not block financial legislation. “He has asked for a rapid review to see how it can be put back in place,” it said.

Cameron’s chancellor, George Osborne, was furious.

“Unelected Labour and liberal lords have defeated a financial matter passed by the elected House of Commons,” he said, “and David Cameron and I are clear that this raises constitutional issues that need to be dealt with.”

But Osborne also said he would “listen” to criticism and seemed to prepare to amend his legislation, saying, “I believe we can achieve the same goal of reforming tax credits, saving the money we need to save to secure our economy while at the same time helping in the transition.”

Osborne is due to speak in the House of Commons on the matter on Tuesday which will now have to take up the reforms — which were expected to save the government over £4 billion in annual spending — for a third time.

The lower chamber has already voted twice to cut tax credits when independent research shows that low-income families could be left up to £1,000 per year worse off as a result of the changes.

Cameron’s party has a twelve-seat majority in the Commons. But in the House of Lords, unelected Labour and Liberal Democrat peers can outvote the government.

A growing number of Conservatives is now unhappy about the reforms as well.

Nigel Lawson, one of Osborne’s predecessors and a member of the House of Lords, argued on Monday night that the lowest earners needed greater protection. Norman Fowler, a former transportation minister and chairman of the Conservative Party, similarly urged changes.

Cameron and Osborne previously insisted that raising the income tax threshold as well as the minimum wage and extending free child care would make up the difference of reducing tax credits that brought in under the last Labour government.

The prime minister could bypass the opposition in the Lords by stacking the upper house with loyalists. He can appoint as many peers as he wants.

But the sudden introduction of the more than 150 new members Cameron needs to tilt the balance in his government’s favor would surely raise new questions about upper chamber’s legitimacy.

Ironically, it are the Conservatives who have for years opposed Lords reform while Labour and the Liberal Democrats want to turn it into an elected senate.