Osborne Forced to Backtrack on Tax Credit After Lords Defeat

Chancellor of the Exchequer George Osborne said he would act to soften the impact of his welfare reforms after parliament's upper chamber voted to block changes to a tax rule which supplements the income of workers on low pay.

Osborne, seen as the frontrunner to succeed Prime Minister David Cameron before 2020, was forced to backtrack on cuts to so-called tax credits after the unelected chamber defeated a key component of his drive to wipe out the budget deficit.

It is a blow to the chancellor, who has staked his reputation on making Britain 'live within its means', and could spur the leadership ambitions of other members of the ruling Conservative Party who are keen to replace Cameron.

"I have said I would listen and that's precisely what I intend to do," Osborne told broadcasters.

"I believe we can achieve the same goal of reforming tax credits, saving the money we need to save to secure our economy, while at the same time helping in the transition."

In voting against the bill, which had been passed by Britain's elected lower chamber, the House of Lords overturned long-standing political convention by voting to reject a financial matter, setting up a constitutional conflict.

Designed to reduce the annual welfare bill by around 4.4 billion pounds ($6.7 billion), the changes have been widely criticized by those who say they will penalize working families—including by some Conservative lawmakers.

Peers voted to require the government to conduct an independent report on the impact of the cuts before the issue is brought back to the Lords, and voting to require the government to put in place a scheme of transitional protection for at least three years for those affected by the cuts.

Osborne Forced to Backtrack on Tax Credit After Lords Defeat | Politics