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Tax credits: George Osborne told to 'think again' over cuts after crushing defeat by peers

George Osborne has been told he must "think again" over cuts to tax credits after being dealt a crushing defeat by peers over the plans.

Labour's John McDonnell said people had been "shocked" over the way the Chancellor had pushed ahead with the deeply divisive welfare reforms that will slash £4.4 billion from working tax credits and child tax credits for some of the country's poorest households.

The shadow chancellor said a double defeat inflicted by the House of Lords showed it was time for a "full and fair reversal" of the policy.

"George Osborne has got to think again," he told Sky News. "He has been defeated twice in the House of Lords tonight but there are a large number of Conservative MPs as well who have been telling him very, very clearly he has got to think again on this one.

"I think now he is going to have to come back with further proposals."

Peers backed a motion by a majority of 30 delaying the cuts until the Government responds to analysis of their impact by the Institute for Fiscal Studies and considers "mitigating action"

Minutes later the Government was defeated a second time, this time by a majority 17, on a Labour motion to delay the cuts until ministers come forward with "full transitional protection" for those affected for at least three years.

Peers defied calls to respect a century-old convention that the unelected upper chamber does not block financial measures approved by the Commons or manifesto commitments.

Conservative MP Michael Ellis said the result was a "constitutional outrage" as senior figures warned of serious repercussions.

But critics of the reforms defended the devastating blow landed by peers on the Government and called on the Chancellor to "grasp" the chance to redraw the plans.

Unison general secretary Dave Prentis said: "Peers have now given the Government a chance to think again, and the Chancellor should grasp that opportunity with both hands."

Liberal Democrat Leader Tim Farron said the Government had been "forced into an embarrassing climb down".

"George Osborne must now go back to the drawing board and come back with plans to balance the books that don't simply attack working families who are already struggling to get by," he said.

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