The Daily Politics

Chris Mason
Political Correspondent

George Osborne's tone was defiant. But what he actually said amounted to a repeat of his holding position: the government would seek to "lessen the impact" of the tax credit changes; exactly how this would be done will be set out in his mini-Budget, the Autumn Statement, next month.

Mr Osborne repeated that he was committed to what he called a "lower welfare, higher wage economy."

The shadow chancellor, John McDonnell, said if George Osborne "reversed the cuts to tax credits fairly and in full", he would be applauded by Labour.

The Treasury will now have to examine the trade-off between reducing the scale of cuts and the consequences that would have for saving taxpayers' money.

But the prime minister's official spokeswoman has signalled that letters to recipients of tax credits explaining how they'll be affected may now not be sent before Christmas.

Robin Brant
Political Correspondent

The prime minister believes "there is a way to continue with reform of tax credits saving the money needed while at the same time as dealing with transitional measures" to help those affected by the changes.

The prime minister's official spokeswoman said more details of the rapid review of the constitutional issues that arose from last night's Lords vote may come this afternoon.

Asked if the prime minster still had confidence in his chancellor the spokesowman said "absolutely", adding he had "full confidence" saying the two "continue to work very closely" together.

The spokeswoman hinted that letters to tax credit claimants explaining how they'll be affected may not now be sent before Christmas, saying "reform needs to be in place before letters go out".

She repeatedly said the chancellor would detail the transitional measures in the autumn statement in November.

Labour backbencher David Winnick has the final question to the Speaker, and asks whether it would it would be in order for MPs to debate a motion "congratulating the House of Lords" on what they did yesterday. John Bercow replies:

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MPs from across the House have raised points of order with the Speaker - all concerning tax credits.

Dr Liam Fox, former Conservative cabinet minister, says there's "genuine concern" among MPs about the actions of the unelected Lords yesterday, and says he would welcome the Speaker's view "on the constitutional implications of that".

Tory MP Jacob Rees-Mogg adds that since the 1678 declaration of privilege the Lords has not been able to vote on financial matters decided in the Commons. "As our voice-piece, or mouthpiece, will you bring this to the attention of their lordships in no uncertain terms?"  he asks.

Ex-SNP leader Alex Salmond asks whether there has ever been a prior occasion when a chancellor of the exchequer was "outflanked as defender of working classes by the House of Lords"?

Responding to the various points, John Bercow says he "intends no discourtesy" to MPs but "the responsibility of the chair is for order", adding that "nothing disorderly has occurred". 

"There has been no procedural impropriety. That would not have been allowed," he says and adds: "This is now a matter for the government to take forward as it thinks fit."

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Dr Eilidh Whiteford, SNP MP, calls for an emergency debate on tax credits, following yesterday's government defeat. She says the vote by peers "throws the government's plans into chaos" and leaves low-income families "in the dark". MPs need to know how the government will respond "as a matter of urgency".

Speaker John Bercow does not grant a debate, saying it has been raised at Treasury questions and will be debated on Thursday. (He says he's not allowed to say why he decides to agree or disagree with such applications for emergency debates)

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After further questioning over tax credits, George Osborne insists the government "are listening" and will take steps to make sure work pays, citing plans to increase the personal income tax allowance, and introduce a national living wage.

He was earlier asked by one Labour MP whether the letters to tax credit claimants informing them of the cuts will still be sent out just before Christmas. The chancellor told MPs families will be informed once the changes "become law".

Further divisions have emerged at the top of the Conservative Party in the wake of the tax credit defeat inflicted on the government by peers last night. 

A senior Conservative has warned that talk of splits in the cabinet over policy "are only the start." Speaking to the BBC, the source was scathing of the chancellor's refusal to listen before last night's embarrassing defeat.

The senior Tory, who was one of those who sought to urge George Osborne to change direction on the tax credit cuts, said: "Since they won a majority, the  leadership think they're God's gift to politics and think that anything they think or do must be correct by the very dint of them thinking or saying it."

The chancellor says he's happy to listen to any proposals John McDonnell puts forward, but he warns that if he continues to propose "uncapped welfare" the British people won't like it.

Mr McDonnell says George Osborne can press ahead with "tax breaks for the few" or go for a "less excessive" budget surplus by 2020 and reverse the tax credit cuts.

Responding, Mr Osborne says he "profoundly" disagrees with the shadow chancellor's judgement - warning that failure to sort out the nation's finances "will condemn this country to decline".

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Shadow chancellor John McDonnell says for three million people "this is not a constitutional matter", claiming they will lose £1,300 a year.

He tells George Osborne that if he reverses the cuts "fairly and in full" he will "not be attacked by this side of the House, indeed he will be applauded". 

The Daily Politics

Tuesday's guest of the day is Toby Young, joining Jo Coburn in a programme dominated by Monday night's vote on tax credits, with reaction from Conservative David Davis and Labour's Owen Smith.

And the programme will look at future relations between MPs and the Lords with Lib Dem Peer Paul Tyler and constitutional expert Prof Vernon Bognador.

Other guests will include Scottish Labour leader Kezia Dugdale on a bid for more autonomy, which has the backing of Jeremy Corbyn but not everyone in the party is on board.

And to end the programme, Conservative MP Alan Duncan and Left Foot Forward journalist James Bloodworth will look at UK relations with Saudi Arabia.

You can watch the programme on the Live Coverage tab above.

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SNP Treasury spokesman Stewart Hosie says there's half a million more children in poverty since 2010 and potentially four million more by 2015. If George Osborne is in listening mode why doesn't he stop the tax credit cuts, he asks.

Mr Osborne disputes his figures, saying that child poverty is down by 300,000 since 2010, with half a million fewer children in workless households.

Mr Hosie says he's "in denial". The defeat shows the chancellor "has lost his political touch" and his chance of becoming prime minister "has gone up in a puff of ermine-clad smoke".

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In what is already a noisy Commons session, many Conservative MPs are voicing concerns about the Lords' actions last night. George Osborne says he shares their concerns - and makes his case for why the tax credits system needs to be reformed.

Former shadow chancellor Chris Leslie urges George Osborne to state where in the Conservative manifesto - a copy of which he is brandishing - the party said it would cut tax credits. The chancellor responds by praising the manifesto's contest, and says it includes the statement that there'll be £12bn of welfare savings.

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Conservative MP and Treasury Select Committee chairman Andrew Tyrie says whatever MPs' views on the tax credit changes, by overturning the will of the elected chamber of the Commons, the Lords has "exercised the powers of a chamber of parliament in the tax area where, for at least 100 years, it has been well-established that they have and should have only the legitimacy of a consultative assembly".

The chancellor, responding, notes that on only five previous occasions has the Lords blocked a Statutory Instrument - and never on a financial measure. "It is something we are going to have to address... to make sure the elected House of Commons is responsible for tax and spend decisions".

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Chancellor George Osborne is at Treasury questions, and opens with a short statement on last night's tax credits defeat in the House of Lords.

He says "unelected Labour and Liberal Democrat" peers voted down a financial measure approved by elected MPs.

"That raises clear constitutional issues which we will deal with," he tells the Commons, and pledges to continue with tax credits reform "while at the same time lessening the impact on families during the transition". Details will be set out in the Autumn Statement, he adds.

BBC Radio 5 Live

Did Lib Dem peers constitutionally overstep the mark in yesterday's tax credits vote? Lib Dem leader Tim Farron thinks not. "It's not about constitutional issues," he says, though the government "would like to turn it into a nerdy debate".

He says the "reality" is that three million families are going to be "£1,300 a year worse off" by the changes, so it was "absolutely right" for him to ask his peers "to be subversive and undermine the establishment" for the sake of those families. "That's the right thing to do," he adds.

"If it leads to House of Lords reform, that is a second win."