Tax credit changes: does the House of Lords have the right to challenge them?

26 October 2015

There's lots of talk in black and white terms about whether the House of Lords can refuse a regulation making changes to Tax Credits.

There are two main points of contention: whether the Lords should reject a regulation at all, and whether they should defer to the Commons in this case because it involves spending public money.

Regulations are a quick way of changing the law within set limits, and in this case the law on tax credits requires the agreement of both Houses of Parliament to the proposed changes in what people get.

Professor Meg Russell of the Constitution Unit has written a detailed explanation of the "relatively uncharted territory" that the dispute lies within.

The first difficulty is that the law requires the House of Lords to vote on these regulations but, as Professor Russell explains, "it is unusual" for the Lords to use its veto power. The House of Lords Library notes that there have only been four outright rejections of regulations by the Lords.

The second difficulty is the complicated question of when the House of Commons gets to insist that it should have the final decision on how the government spends public money, known as "financial privilege". According to Prof Russell:

"Tough limits apply to the House of Lords' involvement in financial decisions. The 1911 Parliament Act included a definition of 'money bills', over which the Lords has a much reduced delaying power. In practice, by convention, money bills and certain other pieces of financial legislation have an expedited passage through the Lords, with little debate. In addition, the House of Commons can claim 'financial privilege' over amendments from the Lords — rejecting these purely on the basis of their impact on costs. However, as we outlined in a report published last year, these arrangements have become increasingly controversial, and there are pressures for more clarity and/or actual procedural change. Controversy occurred particularly over the coalition's Welfare Reform Bill, which was heavily amended in the Lords."

The rules that apply here are largely matters of convention, which is what is agreed and understood and acted on in both houses. It seems in this case there is little agreement, and strong statements about what is and is not possible are not appealing to some obscure constitutional rule book, but rather to a common understanding of what is, or should be, allowed.

Peers are formally free to vote to reject the regulations so they do not become law, but there is no guarantee as to what would happen next.

Sometimes, as the academic J.A.G. Griffith famously put it, "the constitution is no more and no less than what happens".


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