A short guide Statutory Instruments and the Tax Credits vote

Connect is often asked by our clients to explain parliamentary procedure and it does not get more complex than Statutory Instruments. We thought you might find this short primer useful to put the vote on changes to Tax Credits in the House of Lords in context.

The debate on Tax Credits taking place in the House of Lords today (26 October) concerns a Statutory Instrument, specifically the Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015. This is a Statutory Instrument being ‘made’ using provisions within the Tax Credits Act 2002.

Parliament makes laws in the form of Bills, which become Acts of Parliament. This is known as Primary Legislation. Most Acts contain provisions for further laws to be made without the need for a new Act. This is known as Secondary or Delegated Legislation. One way of understanding this is to see the Act as establishing a principle and the secondary legislation as enacting it in practice. The formal title for most Secondary Legislation is a Statutory Instrument (SI), although you may hear them also referred to as ‘regulations’ or an ‘order’.

The procedure which must be followed for a SI to become law is set out in the parent Act. Procedures can vary. Some Statutory Instruments do not require parliamentary scrutiny. Where the parent Act requires scrutiny, it will specify whether a ‘negative’ or an ‘affirmative’ procedure is to be followed. With the negative procedure, an SI becomes law unless there is an objection from Parliament. Think of it as a passive process: proceed until apprehended. If there is an affirmative resolution, as the name suggests, Parliament has an active role and has to formally approve the draft SI. The affirmative procedure requires a greater level of scrutiny than the negative, but is only used in around 10% of cases. The tax credits regulations follow an ‘affirmative’ procedure.

Regardless of which procedure is used, it is very rare for Parliament to reject a Statutory Instrument. According to the House of Commons Library the last occasion that the House of Commons annulled an SI was in 1979 and in the House of Lords it was in 2000.

Three motions are before the House of Lords today to amend the Statutory Instrument. The government says that technically the SI cannot be amended and therefore any vote other than to approve the SI will have the effect of a ‘fatal’ motion. All of the amendments are effectively a call for further information, while two of the motions call for a further consultation that would mean delaying the approval of the SI. The Tax Credits SI does not actually come into force until 15th April next year, so there is time for the government to respond to the calls for further information or consultation.

The rhetoric over the weekend has been a curious mix of conciliation on the one hand and hardball on the other. Ministers have been quoted saying that the Chancellor is in ‘listening mode’, perhaps in a bid to assuage angst among Conservative backbenchers. At the same time, those Ministers have claimed that any delay caused by the House of Lords would amount to a constitutional crisis. The case for this rests on a convention that Peers do not interfere in finance matters. The problem for the government though is that the procedure they have chosen to use, from the 2002 Tax Credits Act, does involve the House of Lords and has been used on thirteen previous occasions. The government could have avoided this by using a different mechanism, such as making the changes in the Finance Bill.

As so often with Parliament, the debate and the controversy in the build up to it, often has more impact than any single vote. Whatever the Lords do today, the government will be able to find a way of pressing forward with its proposals. For all the talk of using the Parliament Act or stuffing the Lords full of new Conservative Peers, the likelihood is that pragmatism will prevail. The Lords have made their point and will quietly retreat. The government has been forced to listen and will conciliate. Over the coming months we can expect both some mitigation of the impact of the tax credit changes, perhaps through accelerating the increase in the personal allowance, and a re-doubling of the effort to explain why the government believes they are needed. Whatever the vote in the Lords, George Osborne has lost today’s battle, but he is likely to get his way in the end.

More information about Statutory Instruments can be found in the House of Commons Information Office factsheet here. For more information about how Connect can help you to navigate the parliamentary process, please contact Andy Sawford via a.sawford@connectpa.co.uk.

Andy Sawford by:
Andy Sawford