Why June would suit Blair best

Tony Blair is being infuriating. At least to some advisers, the man just isn't concentrating on what matters. They are all hunched over election grids and focusing on when to announce the campaign. And the Prime Minister himself? He has put it all to one side and is frantically obsessed with the detail of the foot-and-mouth crisis - a self-taught expert on sheep movements, rendering processes and vaccination strategies. He is on a personal mission against the spreading virus.

This does not mean that Blair is uninterested in the election date. His hilarious camera ambush at the Stockholm summit put paid to that idea. Rather, he has an intelligent sense of priorities. As long as the crisis is out of control, the danger of a backlash against an electioneering government is great. He can't assume that he will win very big against the Tories until he is winning against foot-and-mouth.

"Winning", in this context, may not mean the actual numbers falling. The curve of the epidemic suggests that won't happen for a while. But it would certainly mean no more cases outside the areas already infected, completing the disposal of the vast heaps of dead animals, an end to complaints that it was taking too long to kill infected herds, and effective "firewalls" protecting other areas. Until this long list is ticked off, the Prime Minister is clear that the election question must come second. If he feels a May election is impossible, what does he do? First, he offers trauma counselling to many around him. As a senior minister told me recently, 3 May has been the preferred choice for as long as four years now: the date was pencilled into the diaries on the very day that Labour swept into Downing Street in 1997. All that planning, all those grids.

Blair's best argument is that it simply doesn't matter electorally. According to the Ministry of Agriculture, there are 64 seats where foot-and-mouth has already been detected; 14 of those were Labour gains at the last election, where a 5 per cent swing to the Tories from Labour would result in Labour losing the seat. To go ahead with a May election in the face of the foot-and-mouth outbreak would more than likely alienate enough voters in those constituencies - which include Northampton South, Medway, Stroud, The Wrekin, and Sittingbourne and Sheppey - to cause that 5 per cent swing. With 14 fewer seats for Labour, and 14 more for the Tories, 28 seats are gone, just like that. We can reasonably add another four or five constituencies that will probably have been hit by early May, which will knock another ten off Labour's majority. Yet that still leaves Labour with a more than comfortable majority of more than 100. As I argued in this column last week, many in the party would be quite happy to see the numbers come down into double, not treble, figures.

Then there's that big political opponent for Labour: voter apathy. The apparently good news for Labour is that, according to the elections guru David Butler of Oxford University, in his book The People Have Spoken (Hansard, just published), "when there is a crisis . . . more will flock to the polling station". Tracking voter turnout throughout the 20th century, he finds it highest in the elections of January 1910, October 1924 and February 1974 - each of which was called suddenly and dramatically. No one could claim that a spring election was called suddenly, but the highly charged atmosphere and sense of national crisis would, on Butler's evidence, increase turnout. This might help Labour.

The problem with history, and psephology, is that elections are dynamic. Overshadowing all this is the threat of a May national backlash against a government perceived to be cynical, removed from the light of the countryside and determined to promote its own interest first.

As I write, No 10 opinion, though seriously divided, is beginning to move towards a delay. How would that happen? First, hardly anyone supports October. The recession might have hit, and it's a horribly long pause for a political system geared up to go now. It has the whiff of Jim Callaghan's famous, and fatal, delay in autumn 1978, which helped usher in the Thatcher era six months later.

No, it would almost certainly be later on in May or early June. Some Labour people would like Blair to give no indication as to when. But if he is to take the moral high ground, the obvious way would be to announce that the local elections will be delayed a month, to allow more time to control the virus. June is then the preferred option for the general election, too.

This removes the main anti-June argument, which is that Labour might have just been battered in May local elections. It makes Blair seem magnanimous, self-confident and generous. It gives him the time he really needs to get on top of the crisis. It removes any mileage the Tories might have got from accusing him of ruthlessness or cynicism - while at the same time giving them some painful financial problems. Oh yes, and it gives people another few weeks to realise the useful effect of the Budget measures. It might even be possible for another interest-rate reduction to be squeezed in.

The main argument against June is that it would, in effect, mean a two-month election campaign. That would either bore the electorate to sleep or risk the Labour campaign leadership making a major slip-up, simply through fatigue or by taking their eye off the ball. The other arguments, about grids and party planning, should not come into it: voters do not care.

This, then, is the real balance sheet facing Blair. For what it's worth, from the outside, this tally of arguments, as related by insiders, seems to point marginally to June. But one thing is certain: the decision will be based entirely on the raw calculation of what would maximise Labour's vote. That's not being cynical; that's just politics.

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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.