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When Parliament Speaks… the Government must listen

This week the House of Lords voted against the government’s proposals for cutting tax credits. A debate in the Commons followed, and a vote was carried with no opposition, backed by MPs of all political colours. The House of Commons thereby sent an unequivocal message to the chancellor: the welfare bill CAN be cut, but without punishing hard work. This was not ‘party political’. Nor was it a vote against welfare cuts or the reform on which all agree.

This week the House of Commons joined the House of Lords in sending a loud and clear message to the Government:

  • Pause the proposed cuts to tax credits and publish a full analysis of their impact on low paid workers;
  • Protect the poorest workers from any negative impact of the cuts; and
  • Reform the tax credit system in a way which does not penalise the lowest earners.

The message stems from a debate and vote on a motion I tabled, with strong backing from a cross-party group of MPs, which was carried through the Commons on Wednesday afternoon with no opposition.

Both Houses of Parliament therefore have given George Osborne a chance to reflect on the likely impact of his tax credit cuts on Britain’s strivers and, more importantly, come up with ways of softening the blow to their budgets.

It’s worth remembering that these strivers were the very people courted by the Chancellor before, during and shortly after the election. He sought tirelessly to convince them that the Tories, not Labour, were the party that would advance the interests of hardworking Britain. Yet it took just two months for a nasty puncture to halt the progress of the Chancellor’s political white van. And he will know this puncture was sustained courtesy of his own reckless driving.

For the Chancellor decided to leave out of the Finance Bill – the primary legislation enacting the measures in his Summer Budget – the single biggest cut ever made to the incomes of Britain’s strivers. He sought to push the cut through Parliament’s Committee Rooms as a statutory instrument, without all MPs being given the chance to debate and vote on this measure.

Thankfully he was called out on this backroom blitz and it was debated, albeit for just 90 minutes, on the floor of the Commons. But George’s political white van was soon to approach an almighty speed bump in the House of Lords. Had the Government included the tax credit cut in the Finance Bill, the Lords would not have been able to delay them. But it didn’t, and so the Lords this week voted to slow down the enactment of the cut.

Forget the talk of this provoking a constitutional crisis. The Lords and, following yesterday’s vote, the Commons have given the Chancellor a political lifeline. He must grasp this lifeline and, in doing so, boost his credentials as a welfare reformer. For the Chancellor now has a chance to reform the tax credit system in a way that can deliver savings, without making the poorest workers and their children worse off.

A month ago – long before this whole debate caught fire on the Tory benches – I put to the Chancellor an emergency proposal to try and protect the poorest workers at nil cost. Such is the structure of the current system, this proposal would have come at the expense of a weaker incentive to work and earn anything above £13,100 a year. So, now the debate has moved on, here is a twofold reform agenda the Chancellor might wish to pursue.

First, the cut should apply only to the tax credits available to new claimants – affording full protection to existing claimants – or be phased in over the Parliament, in tandem with the National Living Wage and extended support for childcare.

Second, the Chancellor must structure the tax credit system so it can be made affordable without clobbering the poor and reducing the incentive to get up in the morning and go to work.

An almighty task, yes, but the Chancellor can now approach it with the backing of both Houses of Parliament.

 

Lord Field of Birkenhead

Frank Field took his seat in the House of Lords in September 2020. Previously, he was Member of Parliament for Birkenhead between 1979 and 2019, sitting as a Labour MP until 2018, and thereafter as an Independent. He chaired the Work and Pensions Select Committee, a position he held until 2019, having chaired the committee in its previous incarnation as the Social Security Select Committee between 1990 and 1997. His Politeia publications include Revisiting Beveridge: A Benefits and Welfare System for the 21st Century (with Andrew Forsey, 2020) and Working Welfare: Contributory Benefits, the Moral Economy and the New Politics (2013).

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