Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015

Lord Tyler Excerpts

Monday 26th October 2015 Lords Chamber

[Baroness Stowell of Beeston]

My Lords, we were very clear in the general election and in our manifesto that we would be introducing welfare savings of £12 billion and that these would be directed at working-age benefits. What we also did at the same time was promise a package of measures to support working families—a new settlement for the people of this country, so that they would continue to be better off in work and would continue to prosper. That is what we were very clear about in the general election campaign. That is what we were elected to deliver for the people of this country.

Secondly, the SI before us will increase the taper rate from 41% to 48%. This will mean that the rate at which tax credits are withdrawn will increase, but we will do so in a measured way with a gradual taper, which will still ensure that those on tax credits who work more will always take more pay home. Finally, it will reduce the income rise disregard, the in-year increase to an individual’s pay that can take place before their tax credit reward is recalculated, from £5,000 to £2,500—bringing it to a 10th of the rate it stood at when we came to power in 2010.

A sustainable economy which reduces inequality and provides opportunity for all means making choices. There are no easy options, but what we try to do is carefully balance spending and taxation decisions so that the richest pay the most towards services that are so vital to everyone, and the climate is right for everyone to seize opportunities to get on and to be successful. The Government’s job is to manage that in the fairest way while delivering the most important thing of all for working people: economic security and sound public finances.

The Government believe that as part of the overall package of measures that support working people, these changes to tax credits are right. If we want people to earn more and to keep more of their own money, we simply cannot keep recycling their money through a system that subsidises low pay. That is the Government’s case for these changes. But with the amendments we are due to consider, there are broader questions at stake, too, about our role in scrutinising secondary legislation and about the financial primacy of the other place.

I know that Members of this House on all Benches take their responsibilities very seriously and are committed to ensuring that the House fulfils its proper role, so let me be very clear. We as a Government do not support any of the amendments tabled to the Motion in my name, but I am also clear that the approach the right reverend Prelate takes in his amendment, by inviting the House to put on the record its concerns about our policy and calling on the Government to address them without challenging the clear and unequivocal decision made in the other place, is entirely in line with the long-standing traditions of your Lordships’ House.

The other three amendments take us into quite different and uncharted territory. All three, in the names of the noble Baronesses, Lady Manzoor, Lady Meacher and Lady Hollis, if agreed to, would mean that this House has withheld its approval of the statutory instrument. That would stand in direct contrast to the elected House of Commons, which has not only approved the instrument but reaffirmed its view on Division only last week. It would have the practical effect of preventing the implementation of a policy that will deliver £4.4 billion of savings to the Exchequer next year—a central plank of the Government’s fiscal policy as well as its welfare policy. It is a step that would challenge the primacy of the other place on financial matters.

I have been to see the Chancellor this morning at No. 11, and I can confirm that he will listen very carefully were the House to express its concern in the way that it is precedented for us to do so, and that is on the right reverend Prelate’s amendment. But this House will be able to express a view on that amendment only if the other three amendments on the Order Paper are rejected or withdrawn.

[Lord Tyler (LD)]

My Lords, the Leader of the House has given us the impression that there is some convention that prevents your Lordships’ House from voting on these amendments. I would ask her to look again at the report of the Joint Committee on Conventions entitled Conventions of the UK Parliament, which states clearly in paragraphs 227 and 228 that it is perfectly in order for your Lordships’ House to take a view on a statutory instrument of this nature and so,

“we conclude that the House of Lords should not regularly reject Statutory Instruments, but that in exceptional circumstances it may be appropriate for it to do so … The Government appear to consider that any defeat of an SI by the Lords is a breach of convention. We disagree”.

Your Lordships’ House and the other place approved the recommendations of the Joint Committee. If the Chancellor had wished to introduce a tax credit amendment Bill, he could of course have used the usual procedure and avoided the embarrassing situation that the Leader of the House is now outlining. He took a short cut to avoid debate, and he has now got the consequences.

[Noble Lords]

Hear, hear!