Tax credit cut: Lords did the decent thing

The widely criticised plan to cut tax credits has been scuppered by the House of Lords, allowing low income families to breath a sigh of relief – for now.

The planned cut to tax credits would have had a profound effect on low income workers, making three million people around £1,000 worse off each year. It also seemed to run counter to the Conservative plan to help working families - by cutting an in-work benefit for those who need it most.

Of course, the argument for cutting the credit was tied up with the plan to increase the minimum wage to £9 – if you earn more you need less in tax credits. This seems reasonable until you factor in that the tax credit cut was to happen immediately but the wage increase to £9 won't happen until 2020. That's nearly five years of reduced pay for millions of homes.

Even if the chancellor couldn't see how unfair this move was, the Lords could, and they've used their power to veto the decision. It may not sound like they've done much but it's unprecedented for Lords to overrule the House of Commons when it comes to financial policies – they usually let the MPs get on with it. But not this time and in stepping in they've made a stand for common sense and, more importantly, common decency.

Bad response

So how has George Osborne responded? Well, he has begrudgingly made room in his budget to push back the cut but what's more telling is that a review has been started into just how much power the Lords should have. Essentially the Tories have started a review in order to try and prevent the Lords stepping on their toes again when it comes to the nation's finances.

It's a pretty depressing situation. Rather than learn a lesson from this scenario, and maybe understand why there has been such uproar against squeezing those who can't afford to be squeezed, the government has decided that in future all such mutinies will be quashed.

If the government really wants to introduce a tax credit cut (and there is no guarantee it won't happen) then it needs to bring forward the wage rise. Instead of making the workers pay through cutting their in-work benefits, why not make businesses pick up the bill?

If the state needs to reduce its bill then it's not workers who should pay, it's just a shame that MPs don't see it like that.