Be liberal, Clegg

The Liberal Democrats cannot belong to a centre-right government and yet insist to supporters that t

I'm sure Nick Clegg's inbox bulges sufficiently with advice without his reading list of suggestions being added to by a Tory activist (that is, a deliverer of leaflets) from Hackney (that is, a deliverer of unread leaflets), but, you know, I'm coming at this from a different angle than most. I'd quite like Nick Clegg to succeed, for one thing, which perhaps gives my advice a different flavour from that of Simon "And We've Just Lost Sheffield, Nick Clegg's Backyard!" Hughes.

I'll get to the advice in a minute. But first: do you know the best thing about Twitter? No, not the superinjunction feeds. Twitter's greatest advantage is that you no longer have to sit through dull-as-ditchwater documentaries, or endure Question Time, to know what the political class are saying to one another; you just scan through the timeline of people who are paid to watch these programmes.

Which is why I know, without having seen it, that the best line in last night's Andrew Rawnsley Channel 4 programme on the coalition came from David Davis, who said: "The Liberal Democrats have got the best seats in the plane, but no parachutes."

I don't quite agree with the imagery. The Liberals do have good seats in the plane, no doubt. But it's not so much that they're not wearing parachutes – or, at least, not just that. It's more that the behaviour of some senior Liberals is akin to the co-pilot coming back into the cabin, mid-flight, opening the aircraft's doors and yelling impotently at the ground 37,000 feet below: "Just cos we're flying this plane doesn't mean we want to go to its destination. We'd really rather it went somewhere much, much further to the left. Look, I've got a flight-plan agreement written last May and everything! D'you hear me?"

The resulting rapid diminution of the distance between ground and aircraft renders the lack of parachutes (not to mention the yelling about preferred destination) a moot point.

I'm not actually a huge fan of coherence in politics: prioritise the human, not the (ideology) machine. But on the axis of coherence, the Liberal Democrats are suffering because they're too close to the 100 per cent incoherent end of the scale. My point is this: you cannot belong to a government of the centre right, but continue to insist to (erstwhile) supporters that you are secretly still on the left, and expect to gain the respect of anyone.

Now, I know what Liberal Democrats will say to this: first, they somehow defy convention and don't belong on that old-fashioned left-right axis ("It's so 20th century, my dear!" Blah, blah). Sorry, but policies do, insofar as any particular policy maps on to a particular point on that axis. (Or its near analogue, the freedom/equality scale. Do you want to build a policy machine that will make every school the same? Or do you want to let thousands of different people open schools and let parents choose for themselves?).

Second, if they admit to belonging on any political axis at all, they'll say that it's a special place with its own values, quite distinct from those found in the Labour or Tory tribes. But nearly every policy debate within both the "old" parties can be seen as a discussion between a liberal and a conservative point of view. There's nothing special about the adjective "liberal" when it's used by someone wearing a bright yellow rosette.

So this is my advice to Mr Clegg. If you continue to invent dividing lines between your party and ours, and shout loudly about those differences, you'll continue to fail. All dividing lines are fiction. (Remember Gordon Brown? Dividing lines were his sole political tool, his entire tactic to insist that all truth, and goodness, and reason, were synonymous with his name.) And what's more, with a coalition government, voters are more aware of this than ever.

If you want to succeed, however, then turn your back on the social-democratic wing of your party and emphasise your inner liberal. It is that instinct which most aligns you with a large number of Tories – and it's not a different liberal instinct from ours because you wear a Lib Dem badge and we wear a Tory one (which is why, for example, if you decide to prevent the election of police commissioners you won't be scoring a point over the Tories which will be congratulated by a grateful electorate; you will only be underlining your current incoherence).

You are more likely to be successful the more you work with, and not against, Conservatives. This isn't a message that either Mr Huhne or Dr Cable will want to hear. But that brings me to my last bit of advice, to underline your commitment to the coalition: get a proper cabinet job. Remove Mr Huhne and Dr Cable from the government, and replace them with yourself and David Laws. Show Dr Cable that it is not only Tories who are capable of being ruthless in pursuit of success.

Graeme Archer is a regular contributor to ConservativeHome hoping to remain on the Tory party official candidates' list. In real life he is a statistician. On Twitter he's @graemearcher.

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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.