Involvement of Lords Spiritual in debate on tax credits

Whilst financial issues are not a mainstream topic for L&RUK, in view of the involvement of the bishops and the Archbishop of York in the debate on the amendments to the Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015, [26 Oct 2015 Vol 765 (56) Col 975], it is pertinent to post a short summary of the relevant parts of the proceedings. The Regulations were made under the Tax Credits Act 2002 which provided that amendments to tax credit legislation could be made by statutory instruments or delegated legislation in order that normal uprating, for example, could be applied.

Draft Regulations

UK Parliament explains:

“These regulations propose that, from April 2016, the income threshold for Working Tax Credit (WTC) should be reduced to £3,850; and the income threshold for Child Tax Credit (CTC) to £12,125. They also propose that the income rise disregard should be reduced to £2,500; and that the taper rate should be increased to 48%.

The Secondary Legislation Scrutiny Committee’s ninth report of this session provides more detail on the policy and some of the arguments presented for and against the proposal.”

Made under the affirmative procedure, the draft Regulations had been approved by the Commons on 15 September and their Lordships had laid a number of amendments, including alleged “fatal amendments” that could have derailed the draft Regulations. What was at issue was whether the Upper House was exceeding its vires in relation to financial decisions. A useful summary is given by Professor Meg Russell, the Director of The Constitution Unit, in her post The Lords and tax credits: fact and myth, in which she states:

“Tough limits apply to the House of Lords’ involvement in financial decisions. The 1911 Parliament Act included a definition of ‘money bills’, over which the Lords has a much reduced delaying power. In practice, by convention, money bills and certain other pieces of financial legislation have an expedited passage through the Lords, with little debate. In addition, the House of Commons can claim ‘financial privilege’ over amendments from the Lords – rejecting these purely on the basis of their impact on costs.”

The debate is of importance in relation to constitutional law, and its outcome is likely to be subject to expert discussion, and response from the Government.

The Bishop of Portsmouth had tabled a “motion of regret” stating that the Government had “failed to take account of short term impact” of the cuts: this was the preferred option of the bishops, and was thought likely to attract the support of many cross-bench peers, who are expected to hold the balance of power. Lord Mackay of Clashfern commented, [Col 998]:

“The amendment proposed by the right reverend Prelate … is entirely in accordance with the arrangements of this House and with the financial privileges of the House of Commons. Therefore from the point of view of the powers of this House, it is by far the safest of the Motions that have been put forward.”

In the event, the Lord Speaker informed the House [Col 1029] that if Baroness Meacher’s amendment was agreed to, [as it was], she could not call the amendment in the name of the Bishop of Portsmouth by reason of pre-emption.

The amendments and the outcome

UK Parliament states:

“An amendment declining to approve the regulations was proposed. A further two motions seeking to prevent consideration of the regulations until certain reports are made to Parliament were also proposed.

The first amendment sought to prevent consideration of the regulations until a report has been produced addressing the Institute for Fiscal Studies’ analysis of the regulations and their impact.

The second amendment sought to prevent consideration of the regulations until:

• consultation and a report to Parliament on the provision of full transactional protection for a minimum of three years for all low-income families and individuals currently receiving tax credits before 5 April 2016 has been completed, such transitional protection to be renewable after three years with parliamentary approval; and
• a report is produced addressing the Institute for Fiscal Studies’ analysis of the regulations and their impact.

Links to the bishops’ speeches are available here, and the result of the divisions on the amendments were:

• Division 1: The amendment to the motion declining to approve the Regulations was rejected: 99 for and 310 against [Bishop of Chester, Not Content; Archbishop of York, Not Content].
• Division 2: The amendment to the motion seeking to delay consideration of the Regulations until a report has been produced addressing the Institute for Fiscal Studies’ analysis of the Regulations and their impact was agreed: 307 for and 277 against [Bishops of Chester and Portsmouth, Content; Archbishop of York, Content].
• Division 3: Their Lordships agreed, by 289 for and 272 against, an amendment seeking to delay consideration of the Regulations until consultation and a report to Parliament on the provision of full transactional protection for a minimum of three years for all low-income families and individuals currently receiving tax credits before 5 April 2016 has been completed, such transitional protection to be renewable after three years with parliamentary approval [Archbishop of York, Content; Bishop of Chester, Not Content].

Footnote

Baroness Hayman (CB) observed, [Col 1016],

“Very powerful speeches were made from the Bishops’ Benches. I am delighted that the right reverend Prelate the Bishop of Gloucester is here for today’s debate. I should warn her—or console her—that it is not always like this.”