Is the media mogul dead?

The future of a great tradition rests with Lord Bell

It’s been a bad week to be an invincible communications overlord. With WPP’s Martin Sorrell on the receiving end of the encouragingly named "shareholder spring", we’ve seen a decrease in moustache-twirling in the once engagingly despotic world of global public relations. Is there room in the brave new caring, sharing, transparent world of communications for a good old fashioned media tsar?

If there is, the mantle must be taken up by Lord Bell. The former Thatcher spin doctor and recent Paxman sparring partner has successfully negotiated a deal with Chime to buy a section of its PR businesses for a total sum of £19.6m. He spoke to industry bible PRWeek:

We’re going to run a private company and our private lives will become private again. I’m relishing the opportunity and I’m sure my colleagues are as well.

The arched eyebrow and slow, finger by finger tap on the solid ivory desk are left to one’s imagination.

The newly formed BPP Communications takes Bell Pottinger Public Relations, Chime's 60 percent stake in Pelham Bell Pottinger, Bell Pottinger Public Affairs, Bell Pottinger Sans Frontières and Bell Pottinger Middle East. This leaves Chime to operate its remaining PR businesses under the lobbying-free "Good Relations Group", headed by the disappointingly cheery current Bell Pottinger group chairman Kevin Murray. According to the Holmes Report, Chime will:

Invest the proceeds of the sale in its faster growing businesses: sports marketing, digital communications and healthcare communications.

Not exactly Citizen Kane, but with Chime’s share price climbing by 11 per cent by lunchtime on the day of the deal, clearly investors didn’t care. Easy to see why Investec make disparaging reference to "the PR distraction" in their approving comments on the deal from Chime's perspective.

The question that now must be asked is how the UK lobbying industry is going to launder its image if it wants to be seen as a valuable area of development. Every day Leveson, reading out SMS messages like a disapproving classics teacher, does further damage to the myth of the direct line – a lobbyist’s stock in trade – as a thrillingly effective magic button. As the unease caused by the Independent's sting on Bell Pottinger wears off, calls for a mandatory register of lobbyists have been forgetten, yet the industry continues to flounder. And Martin Sorrell’s other troubles have hardly been alleviated by his perceived attachments to a dodgy business.

The industry’s image is something even Bell has on his mind. He concludeds his comments to PRWeek with an upsettingly mundane revelation:

A proposed name for the holding company was Backgammon, but this was later dismissed as it sounded as if they were calling the new venture "a gamble".

Clearly there’s just no place in this world for spy novel theatrics or board game analogies any more.

The last of the moguls, Martin Sorrell. Photograph: Getty Images

Josh Lowe is a freelance journalist and communications consultant. Follow him on Twitter @jeyylowe.

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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.