Change to tax credits is a key part of welfare reform

Morning View
Morning View

The government last night did not suffer the worst fate that it could have done.

The Lords overwhelmingly rejected a Liberal Democrat bill to kill off entirely its plans to cut tax credits.

But peers did support a motion to delay the cuts until the government responds to an analysis of their impact by the Institute for Fiscal Studies.

In doing so, the Lords broke a century-long convention that the unelected upper chamber does not block financial measures approved by MPs.

Following the defeat last night, the chancellor said that he will listen to concerns about the impact of the cuts and address them in his autumn statement. George Osborne also said that he and David Cameron felt that the vote raises constitutional questions that “need to be dealt with”.

While it is understandable that peers wanted to flex their muscles, it was unwise of them to do so in this way.

The very existence of the House of Lords has been increasingly in the spotlight, amid longstanding concerns about the notion of an unelected chamber. Labour in 1999 got rid of most of the hereditary peers, whose voting rights had seemed increasingly anachronistic on the eve of the 21st century.

But the main reason there has been no significant reform since then is that there is no consensus on how to change the chamber, particularly within the Conservative Party.

Last night’s defeat might help to concentrate Tory minds.

As to the issue in hand, tax credits, it might well be that Mr Osborne’s plans will be more palatable after the autumn statement. But his overall objective is the right one.

Britain’s welfare state is a fine thing, and an essential part of the civilised structure of the country, but it has long needed an overhaul. It must be simplified and ensure that work pays.

The government has a mandate, particularly when it comes to its most popular policy, welfare reform. Change to the highly complex tax credit system is a key part of that reform.