Lords discusses tax credits

26 October 2015

Members of the Lords discussed draft regulations on tax credits on Monday 26 October.

An amendment to the motion declining to approve the regulations went to a vote with 99 for and 310 against, so the amendment was rejected.

An 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, went to a vote. Members voted 307 for and 277 against, so the amendment was agreed.

Peers also voted on an amendment to the motion 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. Members voted 289 for and 272 against, so the amendment was agreed.

About the Draft Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015

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.

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
  • a report is produced addressing the Institute for Fiscal Studies' analysis of the regulations and their impact

Finally, a further amendment to the motion was tabled by the Bishop of Portsmouth. It called on the government to consult further on the regulations and to revisit their impact but, if agreed to, would not prevent approval of the regulations.

How do these draft regulations become law?

These changes to the tax credit system are proposed through regulations, which are a Statutory Instrument (SI). An Act will often contain a framework and statutory instruments are used to provide detail that would be too complex to include in the Act itself. They are also easier for the government to change than an Act – for example to upgrade the rate of payment each year or amend the necessary forms in the light of experience.

This Statutory Instrument is subject to the affirmative procedure, and must be debated and approved in both Houses before it can be made law. As part of this procedure, a vote can be taken on it if the House wishes, but is not essential; most Statutory Instruments are approved in the House of Lords without a vote. The Commons have already approved the regulations.

Further information

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