Cabinet in crisis as ministers turn on George Osborne and his tax credit letter timed to ruin Christmas

Cabinet in crisis as ministers turn on George Osborne and his tax credit letter timed to ruin Christmas

George Osborne is facing a Cabinet backlash over his plan to cut state benefits for millions of families, who will be notified before Christmas.

Three Cabinet ministers, another senior minister and a number of Conservative advisers have privately expressed grave concerns over the Chancellor’s handling of the reforms.

They warned that Mr Osborne’s policy was being seen as “penalising” the working poor and may turn into a Poll Tax-style error, undermining years of effort to dispel the image of the Tories as “the nasty party”.

The Chancellor’s reform to tax credits, which will see 3.3  million families lose an average of £1,300 next year, is a key component of his plan to eliminate the Budget deficit.

Despite speculation that he may offer concessions, Mr Osborne has so far refused to bow to pressure from Labour MPs and back-bench Tories who want him to water down his plan.

Robert Halfon, the deputy chairman of the Conservative Party, who was previously Mr Osborne’s Commons aide, has warned critics who are planning to vote down the reforms in the House of Lords to “step back from the brink”.

But ahead of Monday's critical vote, the Tory revolt is spreading. The split between the Treasury and other Cabinet figures comes at a dangerous time for the Chancellor, who has suffered sustained criticism over the policy and faces a critical test in Parliament this week.

Monday's vote in the Lords – where the Conservatives do not have a majority – may see Labour and Liberal Democrat peers overrule MPs who have twice voted in favour of the cuts in the Commons. Such a scenario would damage Mr Osborne’s reputation.

Government figures say that a defeat would provoke a “constitutional crisis” because it would defy the convention under which the Lords gives way to the democratically elected House of Commons on financial matters.

Senior ministers have threatened to speed up reform of the Lords in retaliation. Last night, one furious Cabinet ally of the Chancellor warned peers that they would “vote themselves out of existence” if they torpedoed Mr Osborne’s plan.

However, three other Cabinet ministers urged Mr Osborne to make concessions that would soften the blow for claimants. In particular, they criticised the way the reforms had been handled, singling out the decision to send letters to affected families shortly before Christmas. One Cabinet source said the row was “messy” because the structure of the cuts to tax credits was “creating a lot of cash losers”.

Another senior minister added: “It’s quite right to tackle the deficit and to reform tax credits. We just need to do it in a way that doesn’t feel like people are being penalised.”

The minister said it was not good enough to claim that people would be better off by the time of the next election in 2020, when the minimum wage will have risen and income tax will have been reduced. “It’s a problem now – it needs to be fixed now,” the minister said.

Millions of families who will be affected by the cuts are due to receive a letter from the Government before Christmas informing them of how much they will lose.

Another Cabinet minister said: “This is hurting people. A letter before Christmas is not clever. ‘Happy Christmas, here’s £1,300 less than you thought you’d have.’ That is not a nice letter to get.”

Another Cabinet minister said Mr Osborne must find a new way to explain the details . “Frankly, there’s little sign that the Chancellor wants to change any of his plans. But the details need to be communicated and the numbers explained far better, and that letter is a problem.”

A senior government aide said: “It has taken a long time to get people to think that what we have been doing in government is not just about slash-and-burn but we are in danger of losing that.”

The row surrounded plans to cut working tax credits and child tax credits, benefits that were introduced under the last Labour government. About 4.5  million households on low incomes claim tax credits, at an annual cost of £30 billion.

Mr Osborne wants to tighten the eligibility for the benefits from next April, in changes that will save an estimated £4.4 billion a year.

According to independent House of Commons research, the plan will hit “almost all” recipients of tax credits who are currently in work, including 2.7  million families with children. Some families will lose their entitlement to tax credits completely.

Last week, a number of Tory MPs spoke out against the plans in the Commons but the majority of MPs voted in favour of the reform.

Mr Osborne insisted he was “comfortable” with his plan, while David Cameron said he was “delighted” that MPs had backed it.

Lord Lawson, the former chancellor, added his voice to the criticism.

While it was “absolutely right” to cut tax credits, the proposals were flawed, he said. “I think it is bearing too hard certainly on the poorest,” he added.

Source : The Telegraph By Tim Ross Senior Political Correspondent

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