The government’s reaction to Monday night’s vote on tax credits was to institute a review of the Lords’ powers. The temptation to take a swipe at those who had thwarted them is understandable. But the real problems lies less with the Lords than the way we make budgets.
The day after his July budget, the Chancellor was lauded by many. Not only had he pulled off an unlikely election victory, he had produced a budget which delivered a surplus, introduced a living wage, met the manifesto commitment to cut inheritance tax, raised tax thresholds and the 40 per cent starting rate – all with seemingly little pain. This was a budget rabbit of epic proportions.
It was only when the external commentators started exposing the arithmetic that the government’s claims about winners and losers started to fall apart at the seams.
Even to this day, it is not clear that fellow Cabinet ministers fully understand the extent to which the other measures – extended free childcare, a National Living wage and raised tax threshold – fail to compensate for the tax credit cuts on the poorest working families.
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