The House of Lords could be suspended or flooded with Tory peers if it takes the 'nuclear option' of killing off George Osborne’s tax credits cuts next week, government sources have warned.
Furious Conservatives are threatening retaliation if peers decide to take the unprecedented step of using a so-called ‘fatal motion’ to wreck the Chancellor’s plans to slash the welfare bill.
Insiders have told The Huffington Post UK that the Lords will face a huge backlash should they vote to block the tax credits cuts next Monday.
Their warning comes after we revealed that a cross-party group of peers was set to table a 'fatal motion' to scupper the statutory instrument needed to clear the way for the cuts to come into force next April.
On Monday evening the Treasury also took further steps to face down its critics, releasing analysis which it said showed Osborne's welfare reforms have saved the taxpayer £15bn a year.
Crossbencher Baroness Meacher, seen as the most likely leader of the revolt in the Lords, said today that there was wide-ranging concern over the impact the tax credits changes would have on large numbers of families earning low wages.
The Huffington Post understands a formal motion will be tabled later this week.
Unlike the House of Commons, where David Cameron has a majority of 12 following the general election, the House of Lords has an in-built anti-Tory majority where Labour and Liberal Democrats can outnumber the Conservatives.
'Fatal motions' are used very rarely as unelected peers are wary of overstepping their powers to delay an elected government’s legislation.
Campaigners believe that the usual Salisbury convention, which stops the Lords from blocking a party’s plans, does not apply because the tax credits cuts were not mentioned in the Tory manifesto in May.
But a fatal motion on a financial matter would be unprecedented and Tory sources are determined that the Lords would have to pay a serious political price if the Government is defeated next week.
“If they do this, they will turn this from being a matter about tax credits into a huge constitutional issue of the Lords’ powers,” one insider said.
One option is to simply suspend the Lords’ entire business, and process bills purely through the Commons, while another is to draft a list of new Tory peers to allow the party to get its business through the upper chamber.
Normally if the Lords defeats the Government on a money-related bill, it can be overturned easily in the Commons by the Speaker deeming it a financial issue. But a statutory instrument has no such condition.
In a further sign of the government’s more robust approach towards those calling for the cuts to tax credits to be abandoned, it released analysis which it said the savings made by Osborne was the equivalent of £500 a year extra in income tax for every taxpayer.
According to the Treasury, spending on tax credits would have risen to £40bn a year in 2016-17 (from £28.9bn in 2010-11) if Osborne had not made cuts since 2010.
The tax credit bill is now forecast by the Office for Budget Responsibility (OBR) to be just over £25bn in 2016-17 – around £15bn lower, the government said.
The Treasury said the savings are equivalent to around 200,000 nurses and 70,000 doctors, or around 325,000 teachers, or more than the entire budget of the Home Office.
Chief Secretary to the Treasury Greg Hands said Labour had let welfare spending “spiral completely out of control” and said the Opposition must explain where the money would come from if it reversed the cuts.
Hands said if the government had kept the system put in place by Labour, financial support would still be available to families earning over £50,000.
“When they left office, they had allowed means-tested payments to go so far up the income scale that nine out of ten families – including MPs – were eligible,” Hands said.
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Ministers are anxious to keep the crossbench rebel numbers down and are confident that few of them will back such a controversial move.
But Baroness Meacher told BBC Radio 4's World at One on Monday afternoon that the cross-party determination to overturn the plans was strong.
Asked how much support she had, Meacher said: "A lot. There are clearly a lot of Conservatives who are very worried about this. There's very strong support from the Labour Party and Lib Dem, cross-benchers who are very worried."
She added that Bishops in the Lords were "very deeply concerned" and would "want to support a rethink" of Osborne's plan. Asked if the Bishops would support her, she said: "That's my understanding."
Tory sources believe that the Liberal Democrats will ultimately back off joining with Labour in backing the fatal motion, but under Tim Farron the party have made opposing the cuts a key issue.
One Tory source said that the Lib Dems had most to lose from any forced reform of the Lords. Even a partly-elected chamber could see their numbers slashed, not least as any constituencies would be so large that only Labour or the Lib Dems could win them.
Several Conservatives have warned the tax credit cut will be damaging. Also speaking to the BBC today, Boris Johnson ramped up the pressure on the chancellor. The London mayor said while it was "brave" and "right" to reform the tax credit system the government needed to make sure it was done in a fair way.
“I think everybody is concerned about everything that bares down unfairly on the working poor and it's very important as we take this thing forward we do it in such a way as to minimize that impact," he said.
"I am sure the is a way though that uses tax cuts and the living wage and other ways of helping people over the threshold and helping people to get through this."
Boris said he was sure the implementation of cuts to tax credits was undergoing an "intensive review", adding: "I am sure irrespective of the politics of it nobody wants to do something that is not fair to working people."