GEORGE Osborne has insisted he will press ahead with plans to cut tax credits, despite the Goverment’s humiliating defeat in the House of Lords.

And last night a review into how MPs can be given the “decisive role” over key financial decisions was set up after the double setback in the upper house.

Prime Minister David Cameron ordered a “rapid review” of the relationship between the two Houses of Parliament which will be chaired by former Lords leader Lord Strathclyde.

A Number 10 spokesman said: “The Government is setting up a review to examine how to protect the ability of elected Governments to secure their business in Parliament.

“The review would consider in particular how to secure the decisive role of the elected House of Commons in relation to its primacy on financial matters and on secondary legislation. The review will be led by Lord Strathclyde, supported by a small panel of experts.”

The review of the Lords’ powers came as Osborne warned that the defeat of his tax credits plans raised “clear constitutional issues which we will deal with”.

Speaking at Treasury questions the morning after the Government’s tax credit plans were delayed by three years in the Lords, a determined Chancellor said the Government would still press on with the plans, but there would now be measures to help some of the 3.2 million people affected by the proposals.

Osborne said: “Last night, unelected Labour and Liberal peers voted down the financial measure on tax credits approved by this elected House of Commons. That raises clear constitutional issues that we will deal with.

“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.

“I will set out these plans in the Autumn Statement. We remain as determined as ever to build the low-tax, low-welfare, high-wage economy that Britain needs and the British people want to see.”

In what was an uncomfortable session for the Chancellor, he was attacked by all sides in the chamber, including his own, and was visibly annoyed when the SNP’s economy spokesman Stewart Hosie said Osborne’s chances of replacing David Cameron as Prime Minister had “just gone up in a puff of ermine-clad smoke”.

Hosie said the Chancellor should stop the policy of tax credit cuts before it put “four million children in poverty by the end of this parliament”.

Osborne accused the SNP of being more interested in “political gains”.

“I will go on delivering the reforms to our economy that are needed to help Scotland to continue to grow,” Osborne said.

Labour’s shadow chancellor John McDonnell repeated his promise not to “attack” the Government if Osborne brought “forward proposals to reverse the cuts to tax credits, fairly and in full”.

Osborne replied by saying he would be “happy to listen” to any proposals by McDonnell.

SNP MP Tasmina Ahmed-Sheikh launched a private members’ bill to see automatic hardship payments given to anyone who had their benefits sanctioned.

She told the Commons: “As things currently stand [those sanctioned] have no immediate right of appeal.

“Some of these people may have made a mistake in their paperwork, or have been late for an appointment, they may lack the necessary IT skills to use Universal Jobmatch or have been asked to do something by Jobcentre staff which they didn’t do.

“Whatever their actions, the current consequences carry too heavy a burden. These people are now left with absolutely no means to sustain themselves.”

Tory MP Philip Davies opposed the Bill, saying it would ultimately render sanctions meaningless.

Ahmed-Sheik’s Bill is now due to be given a second reading on December 4.