Osborne vows to ease the pain but Lords defeats raise 'constitutional issues'

Help for claimants hit by proposed tax credits cuts will be set out in the Autumn Statement, George Osborne has announced after peers inflicted a crushing blow on the Government over the move.

The Chancellor bowed to pressure to put in place transitional measures following a double defeat in the House of Lords over the deeply divisive welfare reforms.

Mr Osborne criticised "unelected" Labour and Liberal Democrat peers for blocking the government on a financial measure and David Cameron is launching a "rapid review" into the constitutional fallout of the bruising result.

"David Cameron and I are clear that this raises constitutional issues that need to be dealt with," the Chancellor said.

"However, it has happened, and now we must address the consequences of that. I said I would listen and that's precisely that I intend to do.

"I believe we can achieve the same goal of reforming tax credits, saving the money we need to save to secure our economy, while at the same time helping in the transition.

"That is what I intend to do at the Autumn Statement. I am determined to deliver that lower welfare, higher wage economy that we were elected to deliver and the British people want to see."

Peers defied calls to respect a century-old convention that the unelected upper chamber does not block financial measures approved by the Commons, sparking claims of a "constitutional outrage".

A No10 spokesman said: "The Prime Minister is determined we will address this constitutional issue. A convention exists and it has been broken. He has asked for a rapid review to see how it can be put back in place."