AV and the leadership conundrum

What referendum voting tells us about Nick Griffin, Nigel Farage, Alex Salmond and Ed Miliband.

The campaign ahead of next Thursday's referendum on the Alternative Vote has produced some decidedly odd bedfellows.

The sight of Labour's Alan Johnson and the Green MP, Caroline Lucas, sharing a podium with Ukip's Nigel Farage was disconcerting enough, but it was nothing compared to the pre-Easter affair that brought together Prime Minister David Cameron and "Labour's big beast" (© all newspapers) John Reid. In a campaign characterised by bogus and lacklustre arguments on both sides, the Cameron-Reid thesis that AV threatens the fabric of British democracy was a new low.

Another oddity has been the failure of party leaders to lead. As was soon noticed when we released some "top lines" from our New Statesman/ICD poll on Thursday, British National Party voters were "defying" Nick Griffin's leadership and backing AV by 72 to 18 per cent. It was less noticed that Ukip voters were rejecting AV (64 per cent against, 35 per cent for) at exactly the time Farage was appearing on stage with the Yes camp.


Some supporters of the No campaign seized on the former figures as evidence that AV does indeed benefit the BNP. That's not quite the case. Once again they have conflated the party with those inclined to support it.

Another interpretation of the 72 per cent figure is that BNP-inclined voters are making their decision on AV based on self, not party, interest. Griffin is against AV because it gets him no nearer representation at Westminster; BNP supporters are in favour because it allows them to register their protest (however objectionable it is to the rest of us) but still have a say by backing a mainstream party as a second preference.

There's an inherent logic here which explains why the vast majority are unwilling to follow the BNP leadership. It is the same logic that explains why 63 per cent of Greens, too, back AV, albeit in line with their leadership. This is not about left and right.

It is only surprising that Ukip supporters aren't using the same thought process. But perhaps they consider themselves not as a fringe party but as a major force awaiting a breakthrough. In the 2010 general election, Ukip garnered 919,486 votes, giving it by far the biggest share of all the minor parties.

The Scottish National Party provides a penultimate example of leadership and support base at odds. Alex Salmond has agreed to back AV despite some misgivings (he doesn't think it goes far enough and worries that multiple votes on 5 May will take the spotlight off Holyrood elections on the same day), but 53 per cent of likely SNP voters will put a cross in the box marked "No" on Thursday, with only 30 per cent voting Yes to AV.

Which leaves us with the strange case of the Labour Party. Long since split on the merits of Nick Clegg's "miserable little compromise" – and on electoral reform more broadly – Labour is effectively unleadable on the issue. Political expediency may have prompted Gordon Brown to back an AV referendum just before last year's election, but it was hardly a full-throttled endorsement – his deathbed conversion was so close to his own political expiry that the necessary legislation failed to make it on to the statute book in time.

Long-held positions on electoral reform among MPs and the party in the country alike meant that AV was always going to be the ultimate free vote; nothing whippable here. Nevertheless, that Miliband has failed to convince his party's followers to back him – or, at the very least, his inability to move polling numbers incrementally – is a concern. Among those certain to vote, there remains a 5-point advantage for the Noes.

Perhaps he can turn all those undecided Labour supporters – a sizeable 12 per cent of those certain to vote and 18 per cent of all respondents – into pro-AVers between now and Thursday. If he can, he might just cause, six days out, a major upset and reap the political dividend.

More likely, the Labour vote will remain split, marginally favouring the status quo. While his discomfort won't be as a acute as Clegg's, Miliband will nevertheless have questions to answer.

The kind of unholy alliance that paired Cameron with Reid helps explain away some of this, but not all.

Jon Bernstein, former deputy editor of New Statesman, is a digital strategist and editor. He tweets @Jon_Bernstein. 

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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.