The Government has only itself to blame for its House of Lords defeat over Tax Credits, which it could easily have avoided.
Normally, major financial changes introduced in a Budget are put through the normal House of Commons mechanisms for ‘supply’ (spending) and finance (tax). As these measures were about tax (credits) they should probably have simply gone into the Finance Bill which is produced after each Budget and is currently going through the House of Commons.
If they had the House of Lords would have had no part in the process.
Instead, for reasons only they know, the Government decided to try and put £4bn of tax changes through as a Statutory Instrument or ‘secondary legislation’ – which is a very unusual procedure. This gave the House of Lords an opening because they have to consider Statutory Instruments and they can reject them.
Why? Finance Bills themselves are subject to only very ‘light touch’ consideration by the House of Commons anyway. Before the last Election I explained how the House of Commons actually has only very weak powers over finance anyway here https://colinrtalbot.wordpress.com/2015/04/20/could-the-snp-block-a-labour-budget-no/
Why the Government chose to avoid even this weak form of scrutiny and opt for the even more cursory Statutory Instrument route is a mystery. Trying to “be too clever by half” is the phrase that springs to mind. Perhaps they thought it would minimise debate and publicity. If that was the aim it has clearly and spectacularly failed.
As for “re-establishing the convention that the Lord’s doesn’t interfere with finance issue” which the Government now claims to want to do, that is simple: put major finance measures in the Finance Bill and then the HoL is excluded. But admitting it is that simple would mean the Government admitting they got it wrong.
More importantly what they just may have succeeded in doing is highlighting just how much of so-called ‘welfare’ actually goes to ‘hard-working families’ and not ‘scroungers’. I am guessing that is not what they intended?
For the Chancellor, George Osborne, who was widely seen as riding high before this spectacular debacle this is extremely damaging. His personal ‘credit rating’ has suddenly been downgraded – you could almost say he’s taxed his own credit.