Unsurprisingly, the double defeat in the Lords on tax credits came up at Cabinet today. Baroness Stowell, Leader of the House of Lords, told the meeting that peers had broken the ‘longstanding convention’ of primacy of the Commons on financial matters. The Prime Minister reiterated his desire for a ‘rapid review’, details of which may emerge later today (once ministers have worked out what that rapid review might entail).
Ministers need to work out what it is possible to announce that ensures the same scenario doesn’t arise again when the government tries to get a new Statutory Instrument through. The changes need to be something that the Lords will approve, otherwise the government will end up in a protracted battle with the Upper House. So it would surely involve codifying the convention of the Lords not interfering with financial matters that the Commons has approved: but this in itself would require consensus on what that convention actually stretches to, and whether it covers SIs. Or else ministers could tack this change onto primary legislation, rather than as a standalone SI, something Downing Street didn’t want to be drawn on at today’s lobby briefing.
SIs are not intended for such big measures as tax credit changes, but governments of all colours have extended their use in recent years as a means of avoiding the detailed scrutiny that an item of primary legislation receives in the Commons. They only have one short debate prior to their introduction, not a series of stages in both houses. The Hansard Society regards their increasing use as 'abuse': but you can see why ministers would find them tempting. Equally, after this defeat, you can see why putting these changes into a bill so that they don't have an iconic standalone debate is now tempting.
What ministers also need to work out is whether it is possible to pass the statutory instrument through both houses in time for the letters telling claimants how much they’ll lose to go out as planned before Christmas. Number 10 wouldn’t be drawn on this either today, saying we shouldn’t get ahead of ourselves. But unless Osborne is able to announce mitigation that means that no-one will lose any money at all, it is surely better to get the letters out as soon as possible so that those affected do have time to plan their finances.