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George Osborne 'comfortable' with tax credit cuts

Published 22/10/2015

Lord Lawson said reducing the tax credit bill was right but there 'may be areas where there could be some tweaking'
Lord Lawson said reducing the tax credit bill was right but there 'may be areas where there could be some tweaking'

George Osborne has insisted he is "comfortable" with his decision to push ahead with tax credit cuts despite mounting pressure from Conservative ranks over the reforms.

The Chancellor also urged the House of Lords not to "second-guess" the decision taken by MPs on the controversial benefit changes amid preparations by peers to kill off the measure.

The row over tax credits has focused on the impact the cuts will have on low-income workers, but Mr Osborne insisted that he had to get the public finances under control to protect the poorest in society.

Tory backbenchers are pushing Mr Osborne to find ways to limit the impact of the move on low earners, with senior figures threatening to rebel in a Commons vote next week in a bid to force his hand.

Mr Osborne has refused to hand over specific analysis of the impact that changes will have to the Treasury Select Committee, telling MPs he has published "vastly more" information than had been provided in the past.

"I have provided a huge amount of information, but it comes down to a very simple judgment, which is do you think our welfare system is too expensive? Do you think we should move to a higher wage, lower welfare economy and ultimately that's the decision we are all being asked to take as Members of Parliament," he said.

"We all know this is fundamentally a judgment call and I'm comfortable with the judgment call that I've made and that the House of Commons supported this week."

He added: "The House of Commons has passed this measure twice, it now sits in the House of Lords and the question for the House of Lords is, is it going to respect the 1911 settlement that says the House of Lords must not second-guess the House of Commons on financial matters?"

Labour MP John Mann urged the Chancellor to "avoid Mrs Thatcher's mistakes with the poll tax", warning that the tax credits row risked becoming a "political disaster" for Mr Osborne and the country.

Mr Osborne replied: "Are we a country that is going to live within its means? That economic security is essential for the working people of this country and for families it is really important that they live in a country that does not expose itself to whatever the world throws at it, does not go bust, does not live way beyond its means.

"Because I can tell you the people who are affected, as we know from experience in this country, are the lowest paid in our country. They are the people who lose their jobs, they are the people who suffer when the economy fails, when the country can't live within its means, when the welfare bill gets out of control. I feel very strongly about that."

Tory former chancellor Lord Lawson has joined calls for Mr Osborne to "tweak" cuts to tax credits to protect poorer households.

But the peer hit out at "wholly wrong" attempts to kill off the policy altogether in the House of Lords.

Lord Lawson told BBC Radio 4's Today programme that reducing the tax credit bill was "absolutely right" but there "may be areas where there could be some tweaking".

"You cannot remove these tax credits without people being worse off. The question is who is going to be worse off," he said.

"People are going to get better off as the economy grows, and it is growing and we want a successful economic policy to ensure it continues to.

"But there is a problem.

"Tax credits go a long way up the scale. It goes up to half the families in the land. And so the tweaking would be to make the burden - and there is always a burden when you make these tough decisions to cut tax credits - rather less for the people towards the bottom end of the scale."

The independent Institute for Fiscal Studies calculates that the higher national minimum wage promised as part of the reforms would not compensate entirely for the loss of tax credits.

Liberal Democrats have tabled a so-called "fatal motion" in the House of Lords which would axe the £4.4 billion cut altogether if approved on Monday.

Labour and crossbench peers are also pushing votes that would refuse to sign off on the policy until the Government had considered changes.

Prime Minister David Cameron has warned the upper chamber not to defy convention that it does not block financial measures.

Lord Lawson said: "It is a matter for George Osborne, on reflection, to look at and make changes if he feels necessary in his Budget in the spring.

"It would be wholly wrong constitutionally, wholly wrong, for the unelected House of Lords - which should debate it and argue about it - to do anything that would kill something of a financial nature which has been through the House of Commons, approved by the House of Commons not once but twice."

That principle "was supposed to have been settled" by the 1911 Parliament Act, he said.

"It is of the first importance, constitutionally, that the House of Lords does not try and arrogate to itself the right, on a financial matter, to overturn in any way something which has passed through the House of Commons not once but twice."

Shadow chancellor John McDonnell said: "Once again we're seeing the true face of the Tory Party. It is shameful that David Cameron talked about his 'delight' at tax credit cuts and now George Osborne has said he is 'comfortable' with his decision to take £1,300 a year away from working families.

"It's time for David Cameron and George Osborne to think again and reverse these tax credit cuts."

Shadow Commons leader Chris Bryant insisted Labour would not "crow" should the Government reverse its stance on tax credits.

Speaking in the Commons, he told Commons Leader Chris Grayling: "We all know, every single one of us here knows, that some way or other they're going to beat the retreat.

"Tory backbenchers want (Mr Osborne) to retreat and even The Spectator today says (Mr Osborne) has lost sight of the human factor. So retreat the Government will.

"Can you just tell us when it's going to happen? I promise we won't crow."

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