Tuesday, October 27, 2015

Take on the Lords if they keep ignoring constitutional conventions - but not over Tax Credits

Attempts to reform the House of Lords have a long history of being voted down by unholy alliances,  most often between those who want far more radical reforms and those who don't want any. When a similar fate destroyed the coalition government's attempt to replace the House of Lords with an elected second chamber, David Cameron would have undoubtedly preferred to leave the issue alone for the rest of his premiership.

Unfortunately the House of Lords was not prepared to stay within the conventions which would enable it to be left alone.

One of the interesting aspects of tonight's House of Lords vote to delay cuts to Tax Credits is that some people who I normally agree with were inclined to sympathise with the Lords because they saw it as being about tax credits while some who I normally don't agree with recognised that, as one of them put it after making clear that he doesn't like the government's tax credits proposal,

"constitutionally the House of Lords are on very shaky ground."

There is a convention, called the Salisbury-Addison convention after an agreement following the 1945 general election between the Fifth Marquis of Salisbury who as Lord Cranborne was leader of the Conservative peers and Lord Addison who was leader of the 16 Labour peers, that the House of Lords would not try to block measures which had been included in an elected governments' manifesto.

(There are some fascinating parallels between the careers of the Fifth Marquis of Salisbury and his grandson, the present Seventh Marquis of Salisbury, with whom he had in common that they were both leader of the Conservative peers while known as Lord Cranborne and serving in the Lords under a device called a writ of acceleration before succeeding their respective fathers as Marquis. However, as you could write extensive books on the impact of the Cecil family on British political history over the past 450 years, that will have to be a discussion for another occasion.)

There was also a rule that the House of Lords does not interfere with financial matters which have for centuries been the exclusive preserve of the House of Commons. Last night's vote was possible because what is in reality a financial measure had been proposed to be implemented under a statutory instrument rather than within the budget.

Nevertheless if this was a one-off I would be inclined to recommend that the government let it go.

The problem is, it isn't, and this is not just about tax credits.

According to an article in yesterday's Times by (Lord) Matt Ridley, the elected government has lost three quarters of votes since the general election in the unelected House of Lords, in which it does not have a majority. This was mostly through the 111 Lib/Dem and 212 Labour peers joining together on party lines to outvote the 249 Conservative peers, which they can do unless the great majority of crossbench peers and bishops back the government.

If you look at the particular motion passed by the House of Lords on tax credits in isolation, it could appear to be the House of Lords scrutinising legislation on a particularly controversial measure, and that is how most of the media have reported it, although the Lib/Dem attempt to throw out the tax credits altogether certainly does not fit that description.

But if you look at all the measures on which the House of Lords has outvoted the government since May, you get a different picture: as Matt Ridley puts it

"the losers of the election are exercising, from an unelected chamber, a continual power of veto over the will of the elected chamber."

This cannot go on. But tax credits are not the issue on which to take a stand.

There are those within the House of Lords who have been discussing the possibility of the upper house reforming itself to make it more representative and effective. Any moves in this direction should be welcomed and encouraged.

If that does not happen, and the House of Lords continues to ignore the constitutional conventions, then the government will need to ensure it can get its budget and programme through.

One option discussed this week is to create more Conservative peers (what an irony that an elected Conservative government should have to make against Lib/Dem opposition in the Lords a threat identical to one first made by an elected Liberal government against Conservative opposition in the Lords a little over a hundred years ago).

Another option would be to write the conventions under which the House of Lords has worked into law - using the parliament act (under which the Commons can over-rule the Lords) if necessary to push that law through.

But tax credit cuts - which are seen as hitting the working poor - are not the issue on which to do this.

As Jamie Foster wrote last night in my quote for today, if the House of Lords tries to take up the slack left by an incompetent and ineffective Labour opposition, we really will have a constitutional crisis.

Let's make sure that if this happens, everyone is clear where the blame lies. If they carry on regularly outvoting the government like this, it will not be long before Labour and Lib/Dem peers try to block a measure on which the government has much more support than it has over tax credits. And that will be the moment to take action to reform the House of Lords.


Peter said...

So very strongly agree. Reform of the Lords as a "retaliation" would be seen as petulant and worse, a bully boy tactic o force through a very controversial policy. We mustn't conflate Lords reform (arguably much needed) and tax credits, if we did it would evermore be seen as the Tory response to dissent. Lords reform is much needed but for now we need to rethink policy on tax credits - clearly there is real concern and we really should be encouraging those in work. One of the indicators of good leadership is recognising that sometimes we get things wrong, test and adjust to make things right!

Jim said...

one thing (even if slightly off topic) I just don't get the idea of "tax credits" I just can not see any sort of logic in taxing people, only to give them cash back. Why not just not take it in the first place? it just makes no sense to me.

to be honest neither does the benefit system or tax system, or the idea of benefit caps and things like this. Its all so un necessary.

why not take this as a way forward.

right everyone, yes that is EVERYONE in the UK who is over 18 gets £10,000 per year from the government, that is EVERYONE. Now if you are not working it does not matter any more you have your "citizens payment", if you are in a high paying job, then the "citizens payment" is taken in the form of a tax threshold, meaning you dont pay tax on the first £50k you earn. If you are in a low paying job then you take it as a comination of a tax threshold and a payment.

you see where I am going, (we start at 20% tax, on anything you earn, but Part of the "citizens payment" is used to keep you tax free and the rest is given to you, up until you are earning a decent wage so then its all a tax threshold. anything above that is taxed to pay for everything else.

simples. now the sums may need tweaking a bit, but you see the idea, it keeps the system simple and easy, and above all ensures work pays.

Jim said...

Perhaps my explanation there could use refining a bit.

right so I do nothing - I get £10,000 from the government.

I take a job paying £1,000 per year. I get £1,000 from my job, I use £200 of my "citizens payment" as a tax threshold to keep it all, and I get £9,800 payment. meaning I get £10,800 so my work pays.

it carries on in this fashion until I am earning £50,000 all by myself, so its all just an I owe you nothing, you owe me nothing situation. anything I earn above that is taxed.

as I say the numbers may need to be adjusted so the "citizens payment" is at the correct level, but you see the merit in the idea?

Chris Whiteside said...

Peter - agree absolutely.

Jim - the principle is sound in theory and I remember a fascinating presentation when I was a first year undergraduate from a visiting professor who had been involved in a major study in the states about a system very similar indeed to the one you suggest.

The problem as he explained at the time, is getting the numbers to work in a way which would not bankrupt the government.

There were somewhere between seventy and a hundred people in the room - perhaps fifty or sixty students, twenty lecturers, and two professors besides the speaker.

Having proposed what seemed like a reasonable base level of income - the equivalent of your £10k - and what seemed like a reasonable rate of withdrawing benefit so there was always an incentive to earn more, he also arrived at a point where you stop getting money from the state similar in 1980 money to your £50k.

So as he said, "Everyone in this room except Professor Deaton and Professor Bennathan would have their income topped up by the state, and the tax they would have to pay on their income above the break even point would have to fund it. Do you see the problem?"

Basically until society is very much richer than it is now, the numbers will not add up - and when society is that much richer, the minimum level of income we think people should have will probably be much higher, so the goalposts will move and the numbers will still not add up.

Which is a great pity because it would be an excellent system.

(BTW, the Professor Deaton who was at the lecture is the same Professor Angus Deaton who has just been awarded the Nobel Prize for Economics.)

Jim said...


lots of tweking needed, the tax rate could be raised to 30% perhaps, but still there is the base problem, that is the "benefit rate" seems very low, and the "break even wage" is very high.

I guess its a nice idea, but not a particularly good one. Falling into the territory of I've got a good idea, but I don't think it will work

Chris Whiteside said...

"I've got a good idea, but I don't think it will work" does, sadly, describe it perfectly.