The New Statesman Interview - Alun Michael

He has just made it to the cabinet, yet now he faces political oblivion . . . unless he can show how

Alun Michael is Welsh. Have you got that? He is Welsh to the ends of his fingertips. As Welsh as Donald Dewar is Scottish. In his battle to succeed Ron Davies as Labour's candidate for First Minister in the Welsh Assembly, Michael is being forced to adopt an almost Monty Python-like posture and greet every passer-by with an opening gambit along the lines of, "Hello, did you know I am Welsh?". He is more subtle than that, but not much more. He cannot afford to be. The election contest between himself and Rhodri Morgan is in danger of being perceived as "Westminster Man" versus the "Voice of Wales". There are no prizes for guessing who will win if Michael fails to break the stereotypical images over the next few weeks.

He is trying desperately hard to do so already. When I bumped into him at Westminster the other day he mentioned almost immediately how hard he had campaigned for Welsh devolution in the 1970s. This was the most casual of conversations and I do not have a vote in next February's contest.

I was intrigued enough after that brief exchange to book a longer slot in Michael's hectic agenda, where he is adapting to a new job and fighting for his political life simultaneously. I had become suspicious, too. After all, there is no trace of a Welsh accent in Michael's voice. His campaign manager, the Welsh minister Peter Hain, retains his distinctive South African accent, evoking images of a land as far away from the valleys of Wales as it is possible to get. Surely a candidate so keen to prove his Welshness to a Westminster journalist must have something to hide?

Before the interview a brief perusal of Who's Who suggested the opposite. Michael lives in Wales, he was an active councillor for many years in Cardiff and he had a job as a community worker in the city. Some of Morgan's allies accuse him of losing interest in Welsh politics when he became an MP in the early 1980s, but even that proposition is hard to sustain. He was a spokesman for Welsh affairs under Neil Kinnock in the run-up to the 1992 election.

So why the opposition to him? Possibly Michael is just too much of a Blairite for some party members. Certainly he portrays the Assembly in the language of the Third Way, without using those two words.

"There are some in Wales who see the Assembly as a step towards separatism and some in Whitehall who say they won't have to think about Welsh issues again. Both are wrong. I am looking at ways of creating a new dynamic between the Assembly and other departments and ministers in Whitehall, and a similar new dynamic downwards between the Assembly and local government, business and trade unions."

Michael is obsessed by "partnership", as are many politicians nowadays, but he at least can quote practical examples of what it might mean. Cleverly, but perhaps rather desperately, he relates his 18 months as a minister under Jack Straw to his current campaign. "The work I did at the Home Office was so important in preparing me for the Welsh Assembly. If you look at the Crime and Disorder Act, the emphasis is on partnership between local authorities and the police. It is to do with holistic thinking about what happens at a local level. This is how we will develop our thinking in Wales. It is about seeing the Assembly as part of the democratic process within Wales and the greater engagement of Wales in issues affecting the UK." Never before has the Home Office been seen as having such a profound Welsh dimension.

Yet none of this explains properly why Michael's candidacy is being viewed with suspicion by so many party members in Wales. When Tony Blair spoke at a meeting in Cardiff two weeks ago, several questions were raised about "control freakery" from the centre. I asked Michael specifically about worries over the election timetable and rules which, the doubters fear, are being devised to ensure his victory. His response answers a slightly different question to the one asked. Once again he wants to prove his passion to the Welsh cause.

"I don't understand it. I've lived all my life in Wales. I campaigned for an assembly in the 1960s and 1970s, and would have stood for an assembly had we won the referendum in 1979. I only went to the Westminster parliament in the early years of the Thatcher regime because I was so angry about how my powers as a local councillor were being destroyed by her government. I campaigned vigorously for the assembly in more recent years and in the run-up to the referendum last year."

He makes one qualification. "My role in the referendum campaign was limited in its visibility because I was a Home Office minister. I gave my time in Wales when it was asked for as well as preparing the Crime and Disorder Act. Any suggestion that I've been less than enthusiastic is an invention. I can see why it's being put around, but it's not true."

That is the first hint of the early tensions in the contest. The implication is that his opponent's allies are pushing falsehoods. Michael is ready to counter them. When I ask whether he is claiming to have been more involved in Welsh politics than Rhodri Morgan, his answer is unequivocal.

"Very much so, yes. Not only was I heavily involved in the referendum campaign of the 1970s, I was equally involved in getting devolution back on the agenda in recent years when I was an opposition spokesman for Wales. Then at the Home Office I worked closely with Welsh local government leaders and chief constables. Wales is a disparate nation with massive variations in socio-economic conditions, from extensive rural areas to inner-city poverty. To work in isolation in Wales would be a disaster, which is why I've already met local government colleagues, people from the voluntary sector. I'm trying to create a sense of dynamism."

Would Morgan take a more isolationist approach? Is that the main political difference between the two of them?

"I think it is. For example, Rhodri has proposed a separate Welsh Labour Party and I don't agree with him. I want a strong Welsh voice within the UK Labour Party. Clearly there have been differences between the grassroots in Wales and the centre. Quite often our grassroots have been ignored. But creating an autonomous Welsh Labour Party is not the solution. I will make sure that the voice of the grassroots is heard at the centre of the Labour Party."

Michael's other claim for the job is that he will be a better administrator. "I've got experience and a proven track record in managing change. I think I have shown as a councillor in Cardiff and as a Home Office minister that I can get more out of a combination of people than the sum of their separate parts."

By any objective light Michael's candidacy is a strong one. Yet he himself admits the election looks like being "very tight". There is no attempt to inject momentum by pretending he is sailing to a triumphant win. Perhaps this is pre-election spin, but I spoke to several Blairites who are involved in his campaign in Wales and to another Blairite who looks on anxiously but impotently from London. All predicted he would lose. And Michael is wary of making too much of Blair's implied endorsement during the prime ministerial visit two weeks ago. "The endorsement and support of the Prime Minister was very welcome, but he has made it clear that it is a matter for the people of Wales to decide."

Michael could become an early victim of the unexpected paradox arising from devolution. You might have expected people to be grateful that Westminster is giving its powers away. But devolution has had the reverse effect. It has heightened mutual suspicions. In Scotland the SNP has been the main beneficiary and Labour is suffering even though it has delivered the much sought-after parliament. In Wales, Rhodri Morgan may be spurred to victory on the back of fears about "control freakery", although the government has handed over many levers of control to the Assembly.

It is a perverse context in which to place a debate about the merits of devolving power, but Michael keeps on having to stress how "Welsh" he is because of suspicions about "that lot in Westminster". If Michael were to lose it would be a big personal setback and an embarrassment for the government. It is a grim prospect: after being promoted to the cabinet in October, the realisation of most politicians' dreams, he faces political oblivion in February. What is more galling is that he would probably have got to the cabinet sooner or later anyway; but the Welsh portfolio obliges him to stand in the contest for the Assembly leader.

However, he can comfort himself that Blair has admired him ever since they worked together in the shadow home affairs team in the early 1990s. "Whatever happens I will remain in the cabinet as Secretary of State for Wales during the transitional period. But obviously the Assembly is assuming many of the powers which belonged to the minister, so it would be only for a limited time."

I suspect Blair would compensate Michael with another decent job if he were to lose the election. Both would prefer that the occasion doesn't arise. The temperature of the contest in Wales is rising. The result of the ballot will be an important political moment.

This article first appeared in the 11 December 1998 issue of the New Statesman, Plato rules, OK?

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.