Outside the marginals

A commentary on the politics that followed the UK 2010, 2015 & 2017 elections (and THAT referendum)

Tax Credits

The Government seemed to be hell-bent on two objectives:

  1. Imposing severe income cuts on those least able to accommodate such cuts
  2. A truly ghastly political car-crash

Then they seek to create a “constitutional crisis” that can only be resolved by flooding the House of Lords with Conservative Peers to push through “Gideon’s grab”.

And yet it could have been so different.

The Government’s primary claim is that the deficit must be cut and that this proposal will save £4.5billion (ref). The Institute of Fiscal Studies say around 3,000,000 families will be affected (ref). Simple arithmetic demonstrates that the average impact will be around £1,500 per year per family. By definition these families are amongst the poorest in the country.

Yet where do we see similar treatment of the wealthiest? Taking £4.5billion off the richest 1% of the population (say 300,000 tax-payers) will hit them to the tune of an average of £15,000 per year. Is a member of the richest 1% more able to stand a loss of £15,000 per year than the poorest can stand a loss of £1,500?

Someone on minimum wage will earn about £14,000 per year – with overtime let’s say £15,000 per year – so a cut of £1,500 represents a 10% cut on those who have no effective net “disposable income”. If the average income of those in the top 1% is merely £150,000 (remember the top 1% includes many people earning incomes at stratospheric rates – millions of pounds per year), the cut would also be 10% – but the very rich have disposable income – give up a week’s skiing in the Alps and it is more than covered.

But the government insists that these cuts must happen as part of deficit reduction and “we voted for it”.

I have previously debated the quality of this government’s mandate particularly compared to the mandate that they require Trade Unions to achieve to impose a single day’s misery on London commuters (24% of eligible voters).

But the promise to “cut welfare” was incredibly vague and cutting tax credits was ruled out by both the Prime Minister and Michael Grove during the campaign.

These cuts therefore seem cruel and contemptuous of the electorate.

Britain is at risk of becoming a place where the haves and the have nots live in parallel worlds.
Archbishop of York, Dr John Sentamu, House of Lords, 26 October 2015 : Column 1013

Let the final words rest with what families themselves say as they face those Christmas letters. Angela from Stevenage says: “I already work 40 hours a week on minimum wage doing two jobs around my children. I cannot believe that this is actually going to happen. I am terrified. We are not scroungers. We work unbelievably hard just to keep going and, once again, we are being punished for trying to earn a living wage”. She will lose £1,643 a year after she gets that Christmas letter. Sian from Basingstoke writes: “My husband works full-time as a firefighter. We have four children. We won’t survive”. In her Christmas letter, she stands to lose £2,914. Rachel, from Milton Keynes, says: “It probably means that, as parents, we will skip a few extra meals to ensure our children eat”. In her Christmas letter, she stands to lose £2,005.

Finally, we have Tony and Jacinta Goode, from my city of Norwich. He is in full-time work, earning above the living wage, and she is the carer of two substantially disabled children. They are exhausted. Their Christmas letter will tell them that they will lose £60 a week, or £3,120 a year. That is £3,120 from a family where he is in full-time work and she is caring for two disabled children. We do not need to do this to them.
Baroness Hollis of Heigham, House of Lords, 26 October 2015 : Column 994

Surely our constitution has some mechanism to prevent such an outrage – or at least ask the unrepresentative but near-all-powerful Commons to think again?

Pressurise the government on this and they eventually fall back on another argument – “tax credits need reform”. Now this argument has some merit and I am surprised that they have not lead on it.

They also try to claim that other policy proposals (such as increases in childcare provision, raising tax thresholds and introducing a “Living Wage”) will compensate 8 out of 10 of those affected working families (not necessarily those affected by the cut in Tax Credits).

So are they “cutting the deficit” or are they reforming policy concerning low pay?

The danger of Tax Credits – particularly in-work credits – is that they run “out of control” – and there is a strong argument that Working Tax Credit has helped subsidise Scrooge employers and the amount spent on these have increased dramatically – much more dramatically than Gordon Brown expected.Income Support however went down as people were encouraged into work – low paid work which attracted tax credits!

Yet presumably if we legislated to outlaw Scrooge employers – such as by legislating for a proper minimum wage, the number claiming tax credits would go down and those claiming would claim less.

Addressing low pay is an admirable policy objective – but the Conservatives have fumbled this ball! They are a bit like a prop forward unexpectedly finding himself on the wing and knocking-on a potentially try-scoring pass.

The constitutional issue seems to me to be fallacious.

  1. This is not a money bill, financial privilege has not been claimed by the Speaker certifying the instrument.
  2. The Lords is free to consider Statutory Instruments – such as this proposal. They have previously voted down the Labour Government’s attempt to raise National Insurance.
  3. This Statutory Instrument relates to a bill that was not originally a financial bill.
  4. The Clerk of the Parliaments* has certified that the Hollis (Labour) amendment (asking the Government to introduce transitional arrangements) does not fall foul of the financial privilege provisions.

Would Cameron really dare to “Pack the Lords” with 150 cronies to get this unpopular measure through? Would a government supported by 24% of the electorate really be willing to prostitute the House Of Lords to Gideon’s wishes?

I am tempted to feel that if the House of Lords does not stand up for the people and, as a minimum, delay this Statutory Instrument, then what are they for?

* However, does it none the less break convention by trespassing on Commons financial privilege? No. The advice from the Clerk of the Parliaments—and he has seen and confirmed my words on the specific issue—is that Commons financial privilege is exercised in two ways. We can amend an education Bill, say, but the Commons can reject our amendment if the Speaker certifies that the Commons has financial privilege on this issue. Secondly, says the Clerk, the Commons can pass a supply or money Bill, which we cannot amend. He goes on: financial privilege does not extend to statutory instruments—it simply does not. Nor are statutory instruments covered by the Salisbury/Addison convention. The more so, I would add, because the Prime Minister ruled them out himself, and he did because these layered elements to tax credits are all affected by the taper and the cuts.
Baroness Hollis of Heigham, House of Lords, 26 October 2015 : Column 991

[Update: The House of Commons Voted for the Meacher Amendment (to delay the changes until an IFS analysis had been done 307 vs 277) and then for the Hollis Amendment (to delay the changes until a three-year package of transitional financial help for those affected has been agreed upon. 289 to 272). Edward Leigh has within minutes raised a point of order asking the Speaker to assert the primacy of the House of Commons. The deputy speaker declines to do so:

“I understand entirely what the hon. Gentleman is saying. My own feeling from the Chair is that the other place can look after itself; but we also can and will look after ourselves. I think it would be much more dignified for the Chair not to become drawn into what might be a public spat between the two Houses. In the final analysis, each House knows what the factual constitutional position is, and that position is what it is of long standing”.—[Official Report, Commons, 21/10/15; col. 959.]

The House of Commons returns to debating VAT on tampons.  A lot of Dave’s cronies must now be expecting ermine – I hope he has learnt about the dangers of not fulfilling his mate’s expectations.]

Representativeness of the Two Houses.

 as at 2015 House of Commons General Election (Votes) General Election
House of Lords
Conservatives 51% 37% 24% 25%
Labour 36% 30% 20% 22%
Liberal 1% 8% 5% 11%
Other Parties 12% 25% 16% 1%
Non Aligned 34% 41%
100% 100% 66% 100%

The above table compares the political allegiance of members of the House of Commons and the House of Lords (BBC Politics Live : 17:46) with (a) votes cast in the May 2015 General Election and (b) the declared political allegiance of the electorate at the general election. Cross Bencher members of the House of Lords together with the Bishops and a small number declared as specifically non-aligned are collected together as Non Aligned. Abstaining Voters are also treated as Non Aligned.

Representativeness of Parliament 2015

Representativeness of Parliament 2015

Question: Which House most represents (a) the electorate, or (b) votes cast at the General Election?


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4 thoughts on “Tax Credits

  1. Laura Kuenssberg writes in her BBC Blog:

    Tonight a slightly – and unusually – shaky-looking George Osborne said the Lords have behaved in an unconstitutional way and they will be “dealt with”.

    There is an unresolved question about how far the Lords should stray into the governments finances. It’s very clear ministers want to put the problem at peers’ door, not their own.

    On Tuesday, No 10 will announce some kind of review.

    But the real problem is how on earth ministers, and particularly George Osborne, pull themselves out of a hole they have dug with their own hands.
    BBC News Website, 26 October 2015 : Tax credits: A hole of George Osborne’s making

  2. Pingback: Which house is most representative? | Enfranchise me!

  3. Pingback: Which house is most representative? | Enfranchise me!

  4. Pingback: The Crisis of Indirect Democracy and its Consequences | Outside the marginals

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