Former Tory Chancellor Lord Lawson becomes most senior party figure urging rethink on tax credit cuts

Former Conservative Chancellor Lord Lawson has become the most senior figure yet to call on George Osborne to soften the impact of his £4.4bn a year cuts to working tax credits.

He said there “could be some tweaking” to spare those at the lowest end of the income scale suffering, accepting there was “a problem” with the controversial move to cut the subsidies for people in low-paid work.

Mr Osborne is coming under increasing pressure to introduce safeguards to protect the hardest hit, with several Tories threatening to rebel against the Government in a key vote in the Commons next week.

An estimated 3.2 million families are set to lose an average of £1,300 a year when the cuts come into effect.

David Cameron sparked outrage at Prime Minister’s Questions on Wednesday when he said he was “delighted” that the tax credit cuts had passed a Commons vote on Tuesday.

It followed an extraordinary intervention by new Tory MP Heidi Allen, who used her maiden speech to warn that the “poorest and most vulnerable” would be hit the hardest by the cuts.

Her comments were seized upon by Jeremy Corbyn to ask Mr Cameron at Prime Minister’s Questions: “where was she wrong?”

Speaking on the Today programme, Lord Lawson said: "You cannot remove these tax credits without people being worse off. The question is who is going to be worse off," he said.

"People are going to get better off as the economy grows, and it is growing and we want a successful economic policy to ensure it continues to. But there is a problem.

"Tax credits go a long way up the scale. It goes up to half the families in the land. And so the tweaking would be to make the burden - and there is always a burden when you make these tough decisions to cut tax credits - rather less for the people towards the bottom end of the scale."

Mr Osborne faces a tricky choice as he tries to balance widespread concerns about the impact on the lowest paid with his manifesto pledge to cut £12bn from the welfare bill, which are crucial to his plan to balance the books by 2019.

The Resolution Foundation think tank published a report saying there was “no easy solutions” as he considers how to soften the blow of the cuts.

It found that some options being canvassed by MPs would cost much more than the £4.4bn savings from his proposals.

Reports in The Times have suggested Number 10 and the Treasury are split over whether to cave in to demands from figures such as Lord Lawson, Boris Johnson and Zac Goldsmith and introduce safeguards.

But in public Mr Cameron appears to back his Chancellor in refusing to budge over the cuts.

On Wednesday he indicated his willingness to go nuclear with the House of Lords if peers go ahead with a plan to table a so-called ‘fatal motion’ to defeat the £4.4bn tax credits, which would be an unprecedented move by the upper chamber in challenging a key plank of the Government’s financial policy, which was introduced through a parliamentary procedure called a statutory instrument rather than as legislation in the Financial Bill.

The Prime Minister warned the Lords not to defy convention and signalled he would be willing to flood the House with Tory peers to make sure the Government had enough to vote through the measures.