Ministers are setting up a “rapid review” of constitutional arrangements after the House of Lords voted to delay cuts to tax credits.
The House of Lords backed two motions yesterday requiring the government to think again about its plan for £4.4bn-worth of cuts to tax credits.
In the run-up to the vote, ministers had argued that peers had no right to block the will of the Commons on a financial issue.
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Chancellor George Osborne said last night the government would now address the constitutional issues arising.
“Tonight, unelected Labour and Liberal Lords have defeated a financial matter passed by the elected House of Commons, and David Cameron and I are clear that this raises constitutional issues that need to be dealt with,” he said.
Downing Street is expected to flesh out details of its review later today.
This morning, Commons leader Chris Grayling said the government had been defeated because Labour and the Liberal Democrats were upset about the Tories having a majority in the Commons.
“I think this is all about Labour and Liberal Democrat peers in the Lords who are unhappy that they lost the election, the Liberal Democrats, who have eight MPs and 100 peers, deciding they want to wreck the government's programme,” Grayling told the Today programme.
Mr Grayling said there would be a “review of the conventions” between the Commons and Lords to “get things back on to an even keel”.
“It is all about the relationship between the House of Lords and the House of Commons,” he said on Good Morning Britain.
“Sometimes elected MPs have to take difficult decisions, it cannot be right of the unelected members of the House of Lords to intervene and block those decisions.” He said there would “have to be change”, and refused to be drawn on the idea of flooding the Lords with scores of new Conservative peers.
"I don't think we are ruling anything in or out at this stage – we haven't really started the work. My view is I would be reluctant to see us do really dramatic changes, but it's really a matter to sort out the relationship between the Commons and the Lords.”