The progressive case against Lords reform

We know democracy is deeper than elections. We should honour that.

We know democracy is deeper than elections. We should honour that.

The House of Lords needs changing. But does it need this particular reform? Labour pledged this week that it will back Liberal Democrat proposals for an 80 per cent elected chamber. There are five reasons why the left might not think this is such a good idea.

1) Elections are not always and everywhere good. There are certain advantages to having legislators that are insulated from polls, Twitter tidal waves and yes, even voters. Experience demonstrates it breeds conviction politics. Whips are less of a threat, and amendments are more likely to be introduced and won. Significant changes - including blocking the government's attempts to limit trial by jury - have been won by the Lords. The welfare and NHS legislation is just the latest example.

Even if you agree with the principle that Lords should face the electorate, the current proposals would only allow future Lords to serve one term for fifteen years. As Lord Dobbs points out, this means that they will never be subject to genuine electoral accountability. When you can't get re-elected, you may as well do what you were going to do anyway.

2) You shouldn't look at how to design a chamber until you've decided what that chamber is for. At the moment there are whole bunch of unanswered questions. As Jesse Norman astutely points out (£), it makes no sense to consider the issue of electing the House of Lords before we've resolved devolution in Scotland. Who exactly will be governed by the House, and how? Do we want the Lords to be a pool of specialist knowledge providing scrutiny as it does now, or do we want a stronger check on an executive that is often criticised for having too much power, making us more like the US?

If electing our Lords really does give the second chamber more legitimacy, then power will be more dispersed and that may well result in more paralysis. People are already frustrated with governments for not being different or radical enough. With a rival second chamber, this may well get worse. What if the left wanted to come in and set up a universal care service? Or pursue more meaningful devolution? Radical agendas will almost certainly be harder to implement.

3) Ironically, we may see a decrease in diversity. Think of disabled peers like Baroness Jane Campbell. It is much harder for them to fight and win an election than it is to get an appointment. Similarly, we can say goodbye to crossbench MPs and the valuable independence they bring. To get elected to the Lords, you'll have to be a member of a political party - and presumably we'll be presented with candidates who couldn't quite make it to the first chamber.

Democracy is about a lot more than being able to vote. One of the most common criticisms of politicians is that we come from increasingly homogenous backgrounds, turning politics into a career rather than a service. Standing for election often requires wealth. Increasingly you have to be in a position to offer free labour through internships and live in London. Right now the Lords is relatively diverse, at least in terms of experience. If we create an elected second chamber without addressing who stands for election and how, we can expect more of the same.

4) Lords reform is not the public's priority right now. No one talks about the constitution on the doorstep. People are worried about their jobs, their homes and their families. We've already had the AV referendum - spending our time debating technical legislation may look like more navel gazing, especially when the Lords are relatively popular. Research by Meg Russell at UCL shows that the Lords were held in higher esteem than the Commons even before the expenses scandal broke. Shaking it up risks making politics look less relevant, not more.

5) It may hand a huge amount of power to the Liberal Democrats. If the second house became more significant, the LibDems' role as kingmaker would become even more important. And let's not forget that this whole programme is their deal anyway. As Andrew Neil points out, Lords reform is their prize for supporting the Conservative's constitutional boundaries that damage Labour.

Hereditary peers are embarrassing, but what if we could find some way of making appointments with legitimacy. What if we had a chamber that was picked to be more representative - the head of trades in industry, charities, our leaders in art, business, and education. That would bring the wealth of British experience to the table in decision making, whilst preserving a distinctive second chamber that didn't rival the first. The public already believes that legislative scrutiny and listening are more important than votes. We know democracy is deeper than elections. We should honour that.

Rowenna Davis is a journalist and author of Tangled up in Blue: Blue Labour and the Struggle for Labour's Soul, published by Ruskin Publishing at £8.99. She is also a Labour councillor.

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham

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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.