Osborne promises to press ahead with tax credit cuts despite Lords defeat

Downing Street indicated that the letters informing those affected by the cuts were now unlikely to go out before Christmas, as originally planned, noting how "reform needs to be in place before letters go out".

During Treasury Questions MPs were not told how the Government would mitigate the impact of the cuts but any slowing down in their introduction or restricting them would not bring in the desired £4.4bn. Yet Mr Osborne does have the option of lowering his target for a £10bn surplus by 2019/20, giving him some financial leeway.

In a rowdy Commons, the Chancellor told MPs: “Last night, unelected Labour and Liberal peers voted down the financial measures on tax credits approved by this elected House of Commons; that raises clear constitutional issues, which we will deal with.”

Insisting Ministers were as determined as ever to build a low tax, low welfare and high wage economy, he added: "We will continue to reform tax credits and save the money needed so that Britain lives within its means while at the same time lessening the impact on families during the transition.”

John McDonnell, his Labour shadow, told Mr Osborne that if he came forward with measures to "reverse the cuts to tax credits fairly and in full", he would be applauded by opposition MPs.

He appealed to the Chancellor to “listen to reason”, saying that he could either push ahead with tax giveaways to multinational corporations and cuts to inheritance tax for the wealthiest few “or he can reverse those tax breaks for the few and instead go for a less excessive surplus target in 2019/20. He can avoid penalising three million working families with cuts to tax credits and stick to his self-imposed charter”.

The SNP’s Stewart Hosie also insisted Mr Osborne did not need to make the cuts to balance the books. Accusing the Chancellor of being in “absolute denial”, the Dundee MP claimed the Lords defeat had showed he had “lost his political touch and his chance of being Prime Minister has just gone up in a puff of ermine-clad smoke”.

Mr Osborne replied by accusing his SNP shadow of political posturing and stressed how because of Government changes there were “hundreds of thousands more people in Scotland with jobs”.

Elsewhere, Conservative MSP Alex Johnstone claimed the Chancellor tried to drive through the cuts despite repeated warnings from his colleague, the Scottish Tory leader, that families in Scotland faced a financial "cliff edge".

He said Ruth Davidson had raised concerns about the cuts during monthly political strategy meetings with the Conservatives’ UK Cabinet.

Meantime, a senior Labour source accused the Nationalists of double standards, saying how they had condemned the Opposition over its approach in the Lords on Monday night, calling for a three-year delay in the cuts pending full transitional protection, but then put forward an identical amendment during the Welfare Reform Bill’s latter stages in the Commons, which they did not push to a vote.

“It’s total hypocrisy from the SNP,” declared the senior Labour source.

In a separate development, Tasmina Ahmed-Sheikh, the SNP backbencher, promoting her own bill, argued that automatic hardship payments should be given to people facing the imposition of benefit sanctions because the consequences in the current welfare system carried “too heavy a burden".

The MP for Ochil and South Perthshire told MPs some of her constituents had "no food to eat" as a result of sanctions being made and their benefit payments having been stopped.

Her Benefit Sanctions Regime Bill is now due to get a second reading in December but is unlikely to become law due to a lack of parliamentary time.