The Conservatives deserve little sympathy for their defeat on tax credits

By BAGEHOT

THE House of Lords, Britain’s upper house, has just voted to stall the government’s planned cuts to tax credits. According to the Institute for Fiscal Studies these would have left some 3m worse off. As far as Downing Street is concerned, this was not meant to happen. Only weeks ago aides were breezily assuring me that George Osborne would hold his ground on the measures and that he and David Cameron had an innate ability to distinguish the politically feasible from the unpalatable. Now, thanks to the opposition of Liberal Democrat and Labour peers (and after many private and public warnings by members of his own party), the chancellor must review his proposals once again before proceeding and—at the least—spell out more fully how he will compensate those left out of pocket by them.

Members of the Conservative leadership are furious. They point to the convention, dating back to the 1911 Parliament Act and beyond, by which Lords do not block legislation primarily concerned with public spending. They object particularly to the fact that this evening’s vote was carried by Lib Dem peers, of whom there are far too many relative to their support in the country and to their representation in the House of Commons. They also note that the upper house did not give the chancellor the opportunity to set out a plan (already in the works before tonight) to alleviate the tax credit cuts.

Still, spare the Tories little pity. Their policy served the government’s unnecessarily stringent bid to create a large surplus by the time of the next election in 2020. It was an attempt to “front load” the pain of austerity, buying Downing Street room for giveaways in the run up to that vote. It was a bid to heap the burden of deficit reduction onto the sorts of young, low-income people who do not vote and spare the old and asset-wealthy who do so in large numbers. It was predicated on the mostly bogus claim that the government is moving Britain from a “high welfare, low skill, low wage” economy to a “low welfare, high skill, high wage” one (it has done lots on the first category and much too little on the second two; moreover to suggest that the three are causally linked is patently nonsense).

The very fact of the Conservatives’ defeat on this measure is also, if indirectly, the party’s fault. During the last parliament crusty Conservative back benchers sentimental about the House of Lords and its traditions blocked a bid to reform the chamber by Liberal Democrats and other Tories. This move was at least partly rooted in the Conservatives’ long-standing advantage in the upper house. Today, however, the balance has shifted—hence tonight’s government defeat. Those members of the government bleating about a breach of protocol (the constitutional rules are vague on whether the peers have a right to veto statutory instruments, like the tax credits cut, concerning government spending) pushed through by parties without a mandate should blame their own MPs for blocking previous attempts to make the upper house more representative and accountable.

What next? The two defeats mean that Mr Osborne must go back to the drawing board and come forward with a package kinder on low- and middle-earners. This will irk him: the chancellor was keen to push through unpopular measures as soon as possible, the better for voters to forget them before the next election. In the Autumn Statement next month he will probably propose a package phasing in the changes more gradually (it would not do to u-turn completely, after all)—possibly paid for out of a slower rise in the personal allowance.

Ultimately, though, the predictions that the Lords vote spells doom for the chancellor are wrong. It should help kill some of the hubris that has swirled around senior Tory circles since the election: Mr Osborne is politically fallible; he has made big mistakes before; he will do so again. But the fundamentals remain favourable to him and his party. Just like before tonight’s votes, the opposition still lacks credibility, the chancellor’s rivals in the Conservative Party are still deeply flawed and the Tories still command more trust and confidence among the electorate than any other political force in Britain. Tonight was a blow. But it was not fatal.

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