Tories hope 'constitutional crisis' threat will stop Lords from blocking tax credit cuts

It is judgement day for George Osborne and his plan to cut tax credits for millions of workers across the UK as the House of Lords votes on the controversial proposal on 26 October. The peers can either pass the chancellor's measures, sink the reforms in a "fatal motion", or delay them.

Osborne has argued that his plan to hike the National Minimum Wage (NMW) to £9 per hour by 2020 will compensate for the cuts to tax credits. But independent think tank the Institute For Fiscal Studies (IFS) has warned that claimants would be up to £1,000 ($1,533) a year worse off.

The move has also stirred discontent among Conservative backbenchers because the Justice Secretary and top Tory Michael Gove promised before the election that the welfare payments would not be slashed. Heidi Allen, the Conservative MP for South Cambridgeshire, used her maiden speech in the House of Commons to criticise Osborne's move.

The government is now worried that the Lords could deal a considerable blow to their welfare cuts plan, which will see £12bn slashed over the next four years, by totally rejecting the tax credit cuts. Nicky Morgan even issued a last ditch warning on 25 October to cross-bench peers over the vote.

The education secretary claimed the Lords could create a constitutional crisis if they outright reject Osborne's proposal. However, Morgan hinted that the chancellor could be open to a compromise. "I was a Treasury minister in the last parliament, George was my boss at that point – he very much is always in listening mode," she told the BBC's Andrew Marr show.

Meanwhile, Labour has pleaded with the Tories not to pass the legislation as it stands. Shadow chancellor John McDonnell has promised not to attack Osborne if he U-turns on the issue.

"I know first-hand that for politicians the fallout from changing policy can be tough. But sometimes you have to be big enough to admit you got it wrong and do the right thing," the left-winger said in a letter to the chancellor.

"So I am appealing to you to put the interests of these three million families ahead of any concerns you may have about losing face and ahead of petty party politics. If you do, I promise you personally and publicly that if you U-turn and reverse this decision fairly and in full, I will not attack you for it.

"To restore faith in our political system it's time that politicians stopped making promises at elections that they won't keep when in power – this is the lesson the Liberal Democrats learnt the hard way on tuition fees."