The Tories' hardline 2015 manifesto is taking shape

Conservative ministers have been trailing right-wing policies for post-coalition life.

We've heard plenty about the Lib Dems' "differentiation strategy" in the last year, but surprisingly few have noted the Conservatives' equivalent. On Europe, welfare, human rights law and employment regulation, Tory ministers now routinely say what a Conservative government would do differently to the coalition. At last night's meeting of the 1922 Committee, David Cameron promised his MPs that the party would go into the next election "with a clear Eurosceptic position": expect the 2015 Conservative manifesto to include a commitment to hold an EU referendum (likely offering voters a choice between looser membership and withdrawal). Below, I've compiled a list of other Tory-pleasing policies set to make an appearance.

Even deeper and harsher welfare cuts

George Osborne wanted to announce £10bn of welfare cuts in the Autumn Statement but the Lib Dems limited him to £3.8bn. Expect a promise of deeper cuts to appear in the manifesto.

It's also likely that Tory welfare proposals blocked by Nick Clegg's party, such as the abolition of housing benefit for the under-25s and the restriction of child benefit for families with more than two children, will feature. Other policies trailed by David Cameron in his welfare speech in the summer included:

- Preventing teenagers from claiming benefits as soon as they leave school.

- Paying benefits in kind (like free school meals), rather than in cash.

- Reducing benefit levels for the long-term unemployed.

- A lower housing benefit cap. Cameron said that the current limit of £20,000 was still too high. 

Some or all of those could appear in the manifesto.

For-profit free schools

Early on in the coalition's life, Nick Clegg made it clear that he would veto any move to introduce for-profit free schools, viewed by some Tories as the key to transforming the education system. But when he appeared before the Leveson inquiry, Michael Gove indicated that they could be established under a Conservative majority government.

The Education Secretary remarked that unlike some of his coalition colleagues, "who are very sceptical of the benefits of profit", he had an "open mind", adding: "I believe that it may be the case that we can augment the quality of state education by extending the range of people involved in its provision."

Withdrawal from the European Court of Human Rights

The Conservatives have become increasingly hostile towards the European Court of Human Rights (ECHR), which has prevented the deportation of Abu Qatada and forced the government to consider extending voting rights to some prisoners, but Lib Dem obstructionism has prevented reform. The commission set up to examine the proposed British Bill of Rights, split as it was between Cameron and Clegg nominees, failed to reach agreement when it published its report this week.

But in an article for the Daily Telegraph, Justice Secretary Chris Grayling wrote: "I will also be looking clearly towards the next election, and starting work on ensuring that we have a real plan for change then as well." Rather than merely replacing the Human Rights Act with a British Bill of Rights, which would still allow UK citizens to petition the ECHR, it's increasingly likely that the Tories will promise to withdraw from the jurisdiction of the court and leave the European Convention on Human Rights altogether (a position recently supported by former justice minister Nick Herbert). Such a move would require David Cameron to replace Attorney General Dominic Grieve, an avowed defender of the ECHR, but a post-election reshuffle could take care of that.

Hire-and-fire employment laws

Vince Cable ensured that a Tory proposal to allow employers to fire workers at will (contained in the now-infamous report by Conservative donor Adrian Beecroft) didn't become law, but Downing Street made it clear that it approved of the plan and it is likely to feature in the party's election offering.

David Cameron and George Osborne are already dropping hints about what the Conservatives' 2015 election manifesto will look like. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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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.