Tax credit cuts: Osborne 'comfortable' with plan despite pressure from fellow Tories

George Osborne has declared he is “comfortable” with his cuts to tax credits, despite pressure from some of his own Conservative colleagues to soften the impact on the lowest paid.

The chancellor defended his plans to the Commons Treasury committee, just hours after his predecessor Nigel Lawson urged him to make changes to help those who earn the least.

“This is fundamentally a judgment call, and I’m comfortable with the judgment call that I have made, and that the House of Commons has supported this week,” he told the MPs.

In response, Andrew Tyrie, the Conservative Treasury committee chairman, repeated his demand for the Treasury to provide more detailed analysis of how the proposed cuts will hit households at different points on the income scale.

It comes the day after David Cameron told parliament he was “delighted” that MPs had passed the billions of pounds in cuts to family incomes.

Labour’s John McDonnell, the shadow chancellor, said it showed the “true face of the Tory party”.

“It is shameful that David Cameron talked about his ‘delight’ at tax credit cuts and now George Osborne has said he is ‘comfortable’ with his decision to take £1,300 a year away from working families,” he said.

“It’s time for David Cameron and George Osborne to think again and reverse these tax credit cuts.”

There have been reports of a split between Cameron and Osborne on the issue, with the Treasury more adamant than No 10 that the cuts must stand, but both are publicly defending the strategy.

Both initially insisted people would be compensated by a higher minimum wage, tax cuts and extra free childcare, but the government has now conceded some will lose out, after the Institute for Fiscal Studies calculated losses of up to £1,300 for around 3.3 million families.

Since then, a number of Conservatives, including the mayor of London, Boris Johnson, former cabinet minister Andrew Mitchell and now Lawson, have been urging the chancellor to change the plan, while Labour, the SNP and Liberal Democrats want the cuts scrapped altogether.

Speaking on BBC Radio 4’s Today programme on Thursday, Lawson, who was chancellor from 1983 to 1989, said: “You cannot remove these tax credits without people being worse off. The question is who is going to be worse off. People are going to get better off as the economy grows, and it is growing and we want a successful economic policy to ensure it continues to.

“But there is a problem. Tax credits go a long way up the scale. It goes up to half the families in the land. And so the tweaking would be to make the burden – and there is always a burden when you make these tough decisions to cut tax credits – rather less for the people towards the bottom end of the scale.”

The cuts are already tapered but some welfare experts, including the Labour chairman of the work and pensions committee, Frank Field, have suggested ways the lowest-paid could be cushioned.

A blogpost by the Resolution Foundation thinktank analyses some possible solutions to help those affected, but concludes there is “no easy way to compensate for the loss of £4.5bn of state support for working families”. It says raising the personal allowance, lifting the minimum wage or increasing hours worked will not be enough.

In a rare move, the Liberal Democrats say they will try to kill off the proposals when they go through the House of Lords, even though there is a convention that peers should not attempt to throw out financial measures passed by MPs. Labour peers will try to amend the measures.

Echoing the prime minister’s comments in parliament on Wednesday, Lawson said any fatal motion from peers would be unacceptable. “It is a matter for George Osborne, on reflection, to look at and make changes if he feels necessary in his budget in the spring,” he said.

“It would be wholly wrong constitutionally, wholly wrong, for the unelected House of Lords – which should debate it and argue about it – to do anything that would kill something of a financial nature which has been through the House of Commons, approved by the House of Commons not once but twice.”

John Bercow, the speaker of the Commons, has also reminded peers of the convention and their responsibilities as a revising chamber.