Following on from last week’s column about the ongoing debate on Tax Credits, last week the Government proposals were rejected by the Lords. This throws up a constitutional question around whether an unelected body can overturn decisions made by an elected body. The Lords, traditionally do not interfere on financial issues, so what happened last week was unprecedented. Whilst there are different opinions on the actual issue of tax credits, it throws up wider, more fundamental, questions about the role of the House of Lords. The Prime Minister has set up a group to look at the consequences of this action and what, if anything, should be done.
On the specific matter of tax credits, following the Lords vote the Chancellor has said that he will go back and look at the issue again and bring proposals to the House as part of the Autumn Statement, which is due at the end of November. The need to reduce the welfare bill still remains and the Chancellor will still look to address this, but there is a concern that the original proposals were too much too quickly. Some of my Conservative colleagues expressed these concerns in a recent Opposition Day debate (although they still voted with the Government on the issue), and it is this that the Chancellor will look at. In the original proposals the point at which tax credits ceased to be receivable was reduced from £32,960 annual salary to £26,520 meaning that qualifying families could still receive credits whilst earning up to the £26,520 figure. It was also a fact that the amount being received by those who still qualified would fall as the Chancellor was reducing the taper.
The changes did reduce the amount of Working Tax Credits for many people, but as I said in last week’s column they are being offset by other measures such as the lifting of the personal allowance and the introduction of the National Living Wage. There are examples where these did not completely compensate for the loss, but all these changes should be considered as a whole. This is what the Chancellor will do leading up to the Autumn Statement at the end of the month. The size of the welfare bill has to be addressed so that the money available can go to where it’s needed most, but where the threshold should be set is a question that there are many views on.