Tuesday 27 October 2015

Tax Credits row

Update 17th December - Lords veto powers 'to be curtailed'

The Tax Credits Act 2002 section 66 is clear enough. It states:

'No regulations to which this subsection applies may be made unless a draft of the instrument containing them (whether or not together with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.'

The Tax Credits (Income Thresholds and Determination of Rates)(Amendment) Regulations 2015 were duly laid in draft before both Houses of Parliament and were voted through the House of Commons - (see here).  (Note that the government opted to try to introduce this change by way of regulations and not by way of a government bill).

This is what happened when the matter came to the House of Lords:

An amendment to the motion declining to approve the regulations went to a vote with 99 for and 310 against, so the amendment was rejected. 

An amendment to the motion, seeking to delay consideration of the regulations until a report has been produced addressing the Institute for Fiscal Studies' analysis of the regulations and their impact, went to a vote. Members voted 307 for and 277 against, so the amendment was agreed.

Peers also voted on an amendment to the motion seeking to delay consideration of the regulations until consultation and a report to Parliament on the provision of full transactional protection for a minimum of three years for all low-income families and individuals currently receiving tax credits before 5 April 2016 has been completed, such transitional protection to be renewable after three years with parliamentary approval. Members voted 289 for and 272 against, so the amendment was agreed.

The Lords did not approve the legislation.  Neither did they agree on a so-called "Fatal Motion" to kill it off.  Their votes have imposed delay.  As far as legal rights are concerned, the Lords acted within their powers.

So, what is the problem?

The government is seeking to reduce expenditure on welfare benefits.  The proposed cuts to tax credits would save a huge sum of money - (some £4.4bn pa).  (Harshly imposed, the cuts could also inflict a great deal of hardship on recipients).  Since this is a question of money, the government  argues that the House of Lords should not have voted as it did in the face of the express will of the House of Commons.  It is claimed that this is a matter of "convention" according primacy to the Commons on financial matters - The Guardian 26th October - Tax credits vote: PM accuses Lords of breaking constitutional convention.

Ministers are therefore talking up a "constitutional crisis."  In truth, there need be no crisis.  The House of Lords acted as it did out of concern for citizens who would be hit by the cuts.  The House was performing its duty as a revising chamber and, in essence, asking the government to think again.  A brake was applied and that is the constitution working as it should.  Revised regulations could be presented to Parliament and would probably get through if the expressed concerns were addressed.  There are also deep concerns regarding the extensive use of secondary legislation.  Parliament is often asked to approve draft regulations with only the minimum of information on which to base a decision - see Hansard Society - Licence to kill? Should the House of Lords veto the Tax Credits Statutory Instrument?  .  

There is no need for talk about "suspending the House of Lords" or abolishing it or flooding it with new peers who would take the Conservative whip.  Imagine the longer term cost of the latter idea!  A single chamber Parliament (dominated by the executive) would surely be constitutionally abhorrent.

The House of Lords could only be abolished or suspended by an Act of Parliament which would require the consent of the House of Lords itself.  The government would be entering very dangerous territory if it tries to bring forward legislation to do so.  Creating new peers is possible but would be highly unpopular given that it is being done to force through an "austerity" measure.  The irony of several multi-millionaires voting to remove tax credits for poorer members of society has not been lost on the public.

Interestingly, had this matter been taken forward by means of a government Bill then the Lords would have only had a delaying power under the Parliament Acts 1911-49.  Even that delay appears to be too much for a government in a hurry with its programme.  In response to the Lords votes, the government is to hold a review of the powers of the Lords in relation to money matters - Politics.co.uk 27th October  This review is to be led by Lord Strathclyde.


For further discussion see UK Constitutional Law - The Lords, Politics and Finance and also The Hansard Society - Licence to kill? Should the House of Lords veto the Tax Credits Statutory Instrument?  These articles highlight some of the deeper concerns regarding the extensive use of secondary legislation. 

Spectator - Government defeated twice in the Lords on tax credits

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