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

Baroness Manzoor Excerpts

Monday 26th October 2015 Lords Chamber

Moved by

[Baroness Manzoor]

As an amendment to the above Motion, to leave out all the words after “that” and insert “this House declines to approve the draft regulations laid before the House on 7 September”.

[Baroness Manzoor (LD)]

My Lords, there has been a lot of discussion in the run-up to this debate about the role of this House in debating statutory instruments. I know that many noble Lords will wish to pick up on the constitutional role of the House. We have already started to see some of those points being made.

I do not discount the strength of feeling on the issue of whether this House should seek to reject the views of the elected Commons, but I want to be clear about what we are talking about today. We are talking about a measure that, according to the expert analysis of the Institute of Fiscal Studies, will hit 3 million low-income working families. These are people doing the right thing: going out to work and trying to make ends meet. They are exactly the kind of people whom the Government have said they want to help. Yet this change will have a seriously damaging impact on their ability to keep their heads above water. These families will, according to the IFS, lose an average of around £1,000 a year. For many people on low incomes, that will mean the difference between being able to continue to pay to heat their homes, pay their rent and feed their families and not being able to do so. In total, 4.9 million children will be directly affected by the change. Almost a quarter of single parents living in the UK will see their incomes cut.

Yet the Government continue to ignore the overwhelming consensus among charities such as the Children’s Society and Gingerbread—I could name many others, including taxation experts and even their own Children’s Commissioner—that these changes need to be reconsidered. It is no surprise that the Low Incomes Tax Reform Group—by no means a leftie organisation—has said that the impact of these changes,

“on the majority of tax credit claimants will be devastating”.

The problems with the Government’s proposals go far wider than those directly affected. They will also have a huge impact on the important principle—that this Government claim to support—that work should always pay more than a life on benefits. Evidence from the Social Market Foundation suggests that someone earning the average wage for those living in social housing of £8.08 an hour will see the benefits of earning wiped out almost entirely. Because of the way the so-called taper rate interacts with taper rates applied to other benefits including local Council Tax benefit, the marginal deduction rate—the rate at which benefits are withdrawn—will be 93%. That means that for every pound a person earns by going out to work—by taking on extra hours in order to improve their lives—they will keep only 7p.

Liberal Democrats in the coalition Government fought for universal credit. We fought alongside the Conservatives for the “make work pay” agenda. The Government’s proposals run utterly counter to this philosophy. Such a fundamental change in the Government’s approach should be challenged every step of the way.

[Lord Cormack (Con)]

My Lords, 104 years ago, a Liberal Government decided that this House should not have jurisdiction in budgetary matters. The noble Baroness speaks for a party which has a disproportionate strength in this House. She and her party believe in proportion. They also believe in the supremacy of the House of Commons. How does she square the various points I have just made with the speech that she is making and the vote that she is seeking tonight?

[Baroness Manzoor]

I thank the noble Lord for that intervention. I will come to that point and address it in the best way that I can.

I will pick up briefly on the speech made in moving the Government’s Motion by the Leader of the House. I do not discount her views but the overwhelming evidence is that these measures will do real damage.

However, I want to express my disappointment that this debate is not being led by the noble Lord, Lord O’Neill. This set of regulations relates to measures brought forward by the Treasury. It is right that such regulations should be promoted and defended by the Minister from the department responsible, whenever possible. As I said at the start of my speech, while much has been made of the constitutional issues surrounding the Motion, it is ultimately about the impact of the measures on the families affected. The Leader of the House does an excellent job in representing this House outside the Chamber, and in defending the Government’s position on the role of the House inside it, but this Motion is not about those things. It is about tax credit changes and it is reasonable for the House to expect the Treasury Minister to answer its concerns.

Fatal Motions on regulations should be used incredibly sparingly. I wish that we were not in this position but I cannot think of a better reason for this House to use such an option than the lives of 4.9 million children and the parents who go out to work to support them. I have tabled this fatal Motion for a simple reason: when all is said and done, and when the constitutional debate about the role of this House is over, I want to be able to go home this evening knowing that I have done everything I could to stop this wrong-headed and ill-thought through legislation, which will have such a damaging and devastating impact on millions of people’s lives.

We have a duty in this House to consider our constitutional role but we also have a duty to consider those affected by the decisions we make and the votes we cast. Were there another way for this House to reject this proposal and send it back to the Commons to reconsider, I would be all for doing so. Some people have said to me that this is a budgetary measure—indeed, the Leader of the House said so, too—and therefore not within our competence. Were that true, the Government had an opportunity to put these changes into the Finance Bill rather than to use an affirmative statutory instrument, a measure that this House is explicitly asked to consider and approve by the primary legislation from which it stems.

I have been told by many that a fatal Motion is too blunt an instrument. If that were the case then the Government could have placed this measure in the Welfare Reform and Work Bill, which is coming to your Lordships’ House in due course, giving this House the opportunity to amend the proposal and suggest alternatives, but they have chosen not to pursue that course either. So we are left with a statutory instrument, a tool designed for minor changes to processes and administration, being used to implement a substantial change in policy that will affect millions of people’s livelihoods. That is not my decision but I hope that we will do everything we can to stop it.

I want to turn briefly to the other Motions in the names of the noble Baronesses, Lady Meacher and Lady Hollis, and the right reverend Prelate. I am sure that they will speak on their own Motions in detail, so I do not want to dwell on them. However, to be clear, I support all those proposals. It is right that the Government should delay these measures to properly respond to the serious challenges put by the IFS, as the noble Baroness, Lady Meacher, suggests. It is also right that the Government should not make these changes unless there is transitional protection, as the noble Baroness, Lady Hollis, proposes. Fundamentally, however, these are sticking plasters on the wound. Transitional protection will help many of those who will see an immediate cut to their tax credits next April but would do nothing for those who become eligible for tax credits this time next year. If the Government succeed in meeting their employment target then we will see more people in part-time work, which is a great thing, but these people will need tax credits. If they meet their noble and worthy aim of increasing the number of disabled people in employment, that is likely to mean more people in flexible working arrangements whose income may need to be supplemented by tax credits. These people would not be protected by transitional protection. That is why, although I support and will vote for the amendment in the name of the noble Baroness, Lady Hollis, I believe that we need to go further.

I have no doubt that this House could spend many hours debating our constitutional role. I and all those on these Benches—

[Lord Grocott (Lab)]

Does the noble Baroness not acknowledge that there is at least a certain irony in that, for five of the last five and a half years, her party gave strong support to the Cameron-Osborne Government? Now that Messrs Cameron and Osborne come forward with a proposal that they do not like, they are suggesting that the right course of action is a somersault. Would it not have been a lot easier, and maybe a lot more principled, if she and her colleagues had decided to bring down this Government a lot earlier?

[Baroness Manzoor]

I thank the noble Lord for his intervention. He is right to raise that point and quite right to ask that question. As I understand it very clearly, we did veto these proposals.

I have no doubt that this House could spend many hours debating our constitutional role. I, and all those on these Benches, take our role very seriously and will continue to push for reform that means that this House has real accountability to the electorate. But this debate is not about that. This is about putting to rest an issue which is of immense—

[Baroness Browning (Con)]

Will the noble Baroness just reflect on the fact that, in terms of accountability to the electorate on this matter, people who have stood for public office and have been accepted and elected to another place have the mandate? They, and only they, have that mandate on this subject. Although we in this House work very hard in order to reflect our views, so that the other place can take advantage of them, the noble Baroness is going just a bit too far in assuming that she has a mandate.

[Baroness Manzoor]

I do assume that this House has a mandate. We are back to the constitutional role of this House.

I will continue, because some answers have been given to that, and more will be given as we talk more about the role of this House. We want to put to rest an issue that is of immense concern to millions of people up and down the country. If the Government wish to withdraw their regulations, we can avoid this impasse. Sadly, I do not think that the Minister—for whom I have the utmost respect—is empowered to make such a choice. It is therefore right that this House perform its duty and stand up against a poor decision made in the Commons. What the Government do after that is up to them. But I and my colleagues are clear: it is time for this Government to think again. I beg to move.

[The Lord Speaker (Baroness D'Souza)]

I should inform the House that if this amendment is agreed to, I cannot call any of the other amendments to the Motion on the Order Paper by reason of pre-emption.

--- Later in debate ---

[Lord Butler of Brockwell]

My Lords, I think it is a little unfair of the noble Baroness to ask me to interpret the statements of the noble and learned Lord, Lord Mackay. They were perfectly clear. Can I just give the answers I was going to give about the point made by my noble friend Lady Meacher? I cannot be persuaded that this House would be failing in its democratic duty if we did not block this statutory instrument so that the House of Commons could have yet one more debate on it. It has had three already.

[Baroness Manzoor]

I am so sorry to intervene on the noble Lord. I have an observation. The director of the Institute for Government, Peter Riddell, who is greatly respected in Whitehall and Westminster makes the following point. Forgive me, it is rather long but I want to read it.

[Noble Lords]

Oh!

[Baroness Manzoor]

I shall give a short version then:

“The Parliament Acts of 1911 and 1949, establishing the ultimate supremacy of the Commons, do not apply to secondary legislation”.

--- Later in debate ---

[Earl Howe]

I do not dispute that the Institute for Fiscal Studies has looked at these things, but the figure of £1,300 that has been quoted is one that does not take into account the positives that I mentioned. Importantly for families with children, the doubling of free childcare should not be overlooked. For many people, although not for all, that will make it possible to work longer hours. Those are just some of the counterbalances. The noble Baroness, Lady Manzoor, chose not to mention them.

I cannot pretend that these have been easy decisions. However, I put it to the House that the measures that we are taking are the right thing for us to be doing—right not only for individual working families but for the nation. We are still, as a nation, living grossly beyond our means. Even so, eight out of 10 working households will be better off by 2017-18 than they are now because of the combined effect of the measures that we are taking.

[Baroness Manzoor]

Will the noble Earl say where the evidence is to support that assertion about eight out of 10 households? That is partly the problem, because those sorts of impact assessments have not been done.

[Earl Howe]

The evidence was in the Budget analysis, which I am sure the noble Baroness has read—the distributional analysis that came out at the time of the Budget.

--- Later in debate ---

[Earl Howe]

I understand what the noble Baroness is seeking to achieve here, but the fact is that the House of Commons has looked at this three times and has not overturned the proposals. In fact, it has approved them. I would simply say to the noble Baroness that if we are talking about the advice given by the Clerk of the Parliaments, there is a crucial difference between an amendment that it is procedurally permissible to bring before the House, and one which it is constitutionally proper for the House to approve. I do not take issue with the noble Baroness, Lady Meacher, or the noble Baroness, Lady Hollis, bringing forward their amendments. What I do take issue with is the idea that we should vote in favour of either of them, or indeed in favour of the amendment in the name of the noble Baroness, Lady Manzoor.

I need to conclude. For the House to withhold its consent to the regulations today would, in my submission, mean overruling the House of Commons on an issue which that House has already expressed its view on three times. In other words, it would mean doing what this House has not done for more than 100 years, which is to seek to override the primacy of the House of Commons on a financial matter. So I say respectfully to the noble Baronesses, Lady Manzoor, Lady Hollis and Lady Meacher, that there is a right way and a wrong way to challenge government policy on a matter of this kind. This is the wrong way. The right way is to table an amendment such as the one in the name of the right reverend Prelate—not that I support it, but that is the proper way of doing it—or at a suitable opportunity to table an amendment to primary legislation. Indeed, a Bill is coming to us shortly, the Welfare Reform and Work Bill, which would enable noble Lords to do exactly that, should they so choose.

My contention is this. The measures in these regulations form a central plank of the programme on which the Government were elected to office in May. It is a programme that has been in the public domain for a long time. However, even if it was not and even if these were policies dreamt up by the Chancellor overnight, I respectfully say to your Lordships that this House, under its conventions, should not reject statutory instruments or seek to overturn the primacy of the other place on a matter of very sizeable public expenditure. I therefore invite the sponsors of each of the amendments to withdraw them, and I urge the House to allow the regulations to pass. Moreover, I simply remind the House that in order to support the amendment in the name of the right reverend Prelate, the preceding three amendments need either to be withdrawn or defeated.

[Baroness Manzoor]

My Lords, I thank everyone who has contributed to this debate. Noble Lords will be relieved to hear that I do not intend to summarise the excellent contributions that have been made from all sides of the House. As your Lordships know, I am a relatively new Member, and for me it is a privilege to serve as a Member of this House. But with that privilege comes responsibility.

Tabling this Motion was not something I did lightly. I do not discount the strength of feeling on the role of the House and I do not believe that this is a situation in which the House should find itself regularly. However, ultimately this is about the House making a decision on whether we think it is acceptable for the Government to cut off vital support for 3 million families which they claim to support. It is about whether we think it is acceptable for the Prime Minister to make these changes not via primary legislation, but by a procedural instrument—in direct contradiction of what he said to people during the general election. It is about whether we think it is acceptable for this House to relinquish its responsibilities to those affected.

I welcome the Leader of the House saying that the Chancellor will be listening to this debate—and I hope also to the country—very carefully. But I could not look myself in the eye tomorrow if I had not done all I could to stop this devastating measure going through. I know that many in my party feel the same, and while I hold no ill will against anyone who does not share our view, I hope that those who agree that the lives of the 4.9 million children who will be affected should be our primary concern will join us in the Division Lobby. Tax credit cuts for low-paid working families are short-sighted and deeply damaging, not only to the parents and children who will bear the cost, but to the Government’s own long-term goals. I urge the Government to rethink, and I hope the House will choose to reject the regulations as they stand. I wish to test the opinion of the House.