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Osborne urged to think again after tax credits defeat

Peers following a vote in the House of Lords to delay controversial cuts to tax credits. Picture by Press Association
Peers following a vote in the House of Lords to delay controversial cuts to tax credits. Picture by Press Association Peers following a vote in the House of Lords to delay controversial cuts to tax credits. Picture by Press Association

CHANCELLOR George Osborne has been told he must "think again" over cuts to tax credits after being dealt a crushing defeat by peers over the plans.

Labour's John McDonnell said people had been "shocked" over the way the Chancellor had pushed ahead with the deeply divisive welfare reforms that will slash £4.4 billion from working tax credits and child tax credits for some of the country's poorest households.

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".

Mr McDonnell, the shadow chancellor, last night said a double defeat inflicted by the House of Lords showed it was time for a "full and fair reversal" of the policy.

"George Osborne has got to think again," he told Sky News. "He has been defeated twice in the House of Lords tonight but there are a large number of Conservative MPs as well who have been telling him very, very clearly he has got to think again on this one.

"I think now he is going to have to come back with further proposals."

The DUP tweeted last night: "DUP peers were among those tonight who voted against the Government’s tax credit proposals".

Peers backed a motion to delay the cuts until the Government responds to analysis of their impact by the Institute for Fiscal Studies and considers "mitigating action"

Minutes later the Government was defeated a second time, this time on a Labour motion to delay the cuts until ministers come forward with "full transitional protection" for those affected for at least three years.

Later, Mr Osborne announced that help for claimants hit by proposed tax credits cuts will be set out in the Autumn Statement.

Mr Osborne criticised "unelected" Labour and Liberal Democrat peers for blocking the government on a financial measure.

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

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."