In 2013, Cameron and Miliband struggled to escape the shadows of Thatcher and Blair

Both men are failing to articulate a vision that says more about what kind of country Britain should become than about what it has been.

For both David Cameron and Ed Miliband, 2013 was a year in which hope of owning the future was sabotaged by an inability to make peace with the past. The Tories failed to find fault in the leader who once led them to three successive election victories. Labour struggled to see virtue in a former leader who managed the same feat.

The Tories mourned Margaret Thatcher, who died on 8 April, with an intensity in proportion to the change she wrought in Britain’s economy and society. State pomp was deployed to underline that historic victory, which infuriated dissenters who see the triumph of Thatcherism as a calamity for which the Tories ought rather to atone.

Such bitterness is incomprehensible to many Conservatives but its political implications should not be. It is still hard for the Tories to win general elections because parts of the country remember Thatcher’s doctrines as callous and vindictive. Even her most dedicated disciples cannot deny that, in many communities, an inoculation against voting Conservative is part of the legacy.

Cameron once seemed to understand the need to persuade Britain that his party had evolved beyond its cult of 1980s nostalgia. For Tories who believe that “modernisation” is still essential, 2013 was a demoralising year. Cameron’s will to pursue that agenda – never too sturdy – dissolved in fear of Ukip. The Tory year began with the commitment to a referendum on Britain’s EU membership and ended with promises to deprive foreigners of benefits. The fetishes of the party’s angriest tendency were thus indulged all the way from January to December.

In part, that reflects the growing influence of Lynton Crosby, Cameron’s bare-knuckle campaign strategist. He seems convinced that the hazard of reviving old “nasty party” associations is outweighed by the advantage of branding Labour as a friend to welfare-gobbling migrants.

The Tory right doesn’t like Cameron but it can be persuaded to back him because he is biddable. Had his position been stronger, he might have used the Thatcher commemorations as a moment to renew the promise of change, leavening the tributes with acknowledgement of mistakes. An opportunity was missed to reach out to voters who were alienated by the mood of ideological triumphalism. Instead he confirmed suspicions that his party’s ambition in government is to finish a job that the Iron Lady started.

Senior Tories are convinced they can beat Labour in 2015 by rerunning the campaign that last secured the party a majority – the destruction of Neil Kinnock in 1992. In Ed Miliband they see a reincarnation of the high-taxing, anti-enterprise Old Labour caricature from whom voters will recoil on polling day. A curious element of that plan is how little it recognises that the 1992 victory was secured by a moderate Tory leader who tacked towards the party’s inclusive “One Nation” tradition after Margaret That­cher’s defenestration.

The irony was underlined in October when John Major himself counselled the party against reinforcing old flint-hearted stereotypes. He urged compassion, as well as greater attention to poverty and social justice: “If we navel-gaze and only pander to our comfort zone, we will never win general elections.”

The warning echoed advice for Labour that Tony Blair had published in the New Statesman in April. He, too, cautioned against “comfort zone” politics, urging his party not to “settle back into its old territory of defending the status quo”.

Blair warned that the financial crisis had not shifted Britain’s political centre of gravity leftwards – a rebuke to Miliband, whose strategy posits a new public appetite for left-wing populism. Compounding opposition discomfort, Len McCluskey, the leader of the Unite trade union, popped up the following week (also in the NS) to prod Miliband in the opposite direction. In an interview with George Eaton he told the Labour leader not to be “seduced” by Blairites, naming shadow cabinet ministers – Jim Murphy, Liam Byrne, Douglas Alexander – as figures whose malign influence would bring election defeat.

The leader’s office was rattled by the twin interventions but it needn’t have been. Just as Cameron failed to move out of Thatcher’s shadow, Miliband missed an opportunity to define himself in positive terms against the past. With sufficient confidence (and support in the parliamentary party) he might have leapt free from New Labour ultras and hard-left reaction in a single bound. Instead, for much of 2013, it looked as if old factions were wrestling for control of the party’s identity, with its leader cast as a spectator.

Miliband’s uneasy accommodation with his party’s recent past dates back to the narrowness of his victory in the 2010 leadership contest. He understood that unity was paramount after defeat and also that many on the left saw Blairism as a surrender to free-market fetishism and craved its repudiation. The newly elected Labour leader also came to the job without a strong support base in the party. To compensate for that vulnera­bility, he tolerated the vilification by McCluskey and others of “Zombie Blairites” – a fifth column holding the party back from socialist virtue.

This was a useful tactical deflection of the disappointment and embarrassment of trade union bosses who felt the candidate they had endorsed was not performing as advertised. But for Miliband it also meant turning a blind eye to Unite’s strategy for controlling the party’s direction by gaming the process for selecting parliamentary candidates. That bargain unravelled in July when a vicious selection battle in Falkirk was amplified by Tory attacks into a front-page scandal.

The details of what happened in Falkirk are still fiercely disputed. What is beyond doubt is that the episode exposed a brittleness to the unity that Miliband had purportedly achieved. Ideological disputes were tangled up in vendettas dating back to the Blair-Brown feuds. Miliband had wanted to project himself as the standard-bearer for a new age of politics, yet here he was, presiding over a grim display of Mafia-style score-settling.

To distance himself from the smell of corruption, Miliband donned the robes of a reforming crusader and charged into confrontation with his party’s largest financial donor. Blair and his disciples cheered. Many Labour MPs watched in alarm, fearing that a moment of reformist exaltation would cost the party its solvency. By the end of the year, it looked as if Miliband was ready to settle for token reforms in exchange for preserving access to union funds. His challenge is now to negotiate something that looks bold enough to avoid the charge of total capitulation.

The battle over union reform exposed the Labour leader as friendless in his party. There was no cadre of Milibandites for deployment in the TV studios to make their leader’s case in a crisis. Addressing that deficiency was a principal aim when the opposition front-bench team was shuffled in October. The changes were widely reported as a “purge” of Blairites, which was not entirely wrong. Two of the figures that McCluskey had explicitly targeted – Murphy and Byrne – were demoted. But the third, Douglas Alexander, was put in charge of Labour’s election campaign.

More significant was the promotion of MPs who were elected for the first time in 2010 – Tristram Hunt, Rachel Reeves, Gloria De Piero, Emma Reynolds – “clean skins” who are neither scarred nor contaminated by New Labour-era civil war. Miliband’s hope is that this generation will help convince voters his party has a new, forward-looking agenda shaped by its current leader, when the Conservatives are determined to present him as a throwback to an unelectable past. Labour’s class of 2010 is marked by a capacity, lacking in many of their older colleagues, to view the strengths and weaknesses of Blairism without personal rancour. As one young shadow cabinet minister puts it: “Who gives a toss about all that baggage? We just want to win.”

On the Tory side, too, much hope is pinned on recent recruits. The lower and middle ranks of government are now stuffed with young MPs – Liz Truss, Matthew Hancock, Esther McVey, Sajid Javid. Like their Labour counterparts, they have a view of their party’s future that is not jaundiced by rigid nostalgia and historic resentments. Most do not fit neatly into categories of “moderniser” or “traditionalist”. They often combine social liberalism on issues such as gay rights with ultra-Thatcherite economics.

Labour and Tory 2010-ers owe their careers to Miliband and Cameron and are hungry for high office. Those factors combine to make them disciplined. None intends to be in opposition after 2015 and they know that disunity is a fast track to electoral ruin. By contrast, defeatism is rife among older MPs on both sides, making it hard to conceal dissatisfaction with the way in which they’re led.

That doesn’t mean that the younger MPs are inspired by their leaders. Their loyalty is keen but pragmatic. They cannot ignore the obvious weaknesses in Cameron and Miliband – the difficulty each man has in articulating a vision that says more about what kind of country Britain should become than about what it has been.

That failure contributes to the enduring atmosphere of stalemate at Westminster. The longer the malaise lingers, the likelier it gets that the up-and-coming generation’s appetite for power will turn to impatience for control. In 2013, Cameron and Miliband were haunted by victories of bygone eras. Both badly need a breakthrough. If the present leaders still struggle to break free from the past in 2014, a majority in parliament will look beyond reach and the search will begin in earnest for the best candidates to lead their parties in the future.

David Cameron with Margaret Thatcher at 10 Downing Street in June 2010. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 19 December 2013 issue of the New Statesman, Christmas Triple Issue

Show Hide image

Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.