The battle for control of Labour's election machine

As big a question for Ed Miliband as the matter of who delivers Labour’s economic message is the question of who will run the party’s general election campaign.

The Labour Party is undoubtedly more united now than it has been for at least a generation. That is setting the bar fairly low, since its more recent session in government was characterised by a bitter feud between the Prime Minister and the Chancellor and their respective entourages. And Labour’s last stint in opposition only ended once vicious, factional warfare had been quelled.

Veterans declare that the Blair-Brown civil strife was not a patch on the civil wars of the Eighties and that any current tensions around the shadow cabinet are but a dim echo or mild aftershock from the TB/GB era.

That doesn’t stop the media feeling around for cracks to prise open, nor does it stop mischief makers inside and outside the party drawing attention to any fissures that might appear in the otherwise uniform veneer of message discipline. A rich but irregular supply of Kremlinological data is furnished by David Miliband’s periodic interventions.

Whenever the brother who might have been leader says anything in the House of Commons there is a flurry of speculation about his return to the front line of Labour politics. Most of it is unwelcome in the former foreign secretary's office. What he most wants is to be able contribute without it reviving pop-psychoanalytical chatter about his relationship with his brother and without the media gleefully readying itself for a re-enactment of old Blair-Brown-style strife.

Except the only way to get beyond that kind of chatter is for David’s participation to become a normal, regular part of the official Labour offer to the public. It is a good old-fashioned Catch 22: he can’t join the front line because of the psychodrama, and he can’t get out of the psychodrama without rejoining the front line.

The latest round of speculation began with a peculiar piece in the Times (£) on Monday, suggesting that anonymous senior Labour people want David back and are urging him to decide one way or another. The newspaper gave the story deliberate momentum with a leader, echoing that line.

There has been another spike in chatter levels following David’s speech in Tuesday’s welfare debate. The Guardian’s Nick Watt has blogged an arcane hermeneutic reading of the speech to explain what, in the Westminster imagination, David was really trying to say. In an interview in the Mirror yesterday, Ed was asked about his brother and replies that they are now friends. He was also asked to confirm that Ed Balls will hold the shadow treasury brief until the election and declined to do so. Thus the speculative story is embellished and sustained.

The obvious reason Ed Miliband might want his brother back on the front line is to act as a counter-weight to Balls, the shadow cabinet’s most heavyweight figure and the man many in the parliamentary party believe is putting voters off listening to Labour’s economic message.

There was a rash of anti-Balls briefing towards the end of last summer. That came to a stop at Labour’s annual conference, where the shadow chancellor went out of his way to sound collegiate and loyal to the leader’s official line. Both Eds know any hint of a serious rift between them would quickly swallow both of their ambitions. (As I wrote here.) Their relationship is sustained by residual esprit de corps as veterans of Gordon Brown’s entourage and, more substantially, by the old Cold War doctrine of Mutually Assured Destruction.

That doesn’t stop other Labour people agitating for a change of personnel. To some extent, those MPs and scarred Blairite veterans who were toasting David as a king-over-the-water in the early years of Ed’s leadership, when it all looked a bit shaky, have simply amended their toast to shadow-chancellor-over-the-water.

There isn’t any evidence that Ed Miliband plans to satisfy that appetite. At the same time, he cannot ignore the possibility that Balls – indelibly associated in many minds with Gordon Brown’s legacy – is a drag on Labour’s poll rating and an obstacle to the leader’s aspiration to represent renewal and definitive break from the past. Balls, meanwhile, has let it be known that he would rather retire from the front line altogether than take a more junior shadow cabinet role. Miliband hardly wants to contemplate what potential devilry could busy the hands of Balls if they fell idle on the back benches.

The discussion of whether Miliband should hang on to Balls usually focuses on the economic debate. On the one hand, the shadow chancellor’s prediction of a double-dip recession was vindicated; on the other hand, the voters don’t seem to care. But maybe, with a triple dip, they will ... but what if growth returns? And so on and so on, round and round the argument goes. But there is another factor in play.

Balls has historically commanded the loyalty of powerful players within the Labour Party. He has, by reputation, been assiduous in building a discreet internal power base: a party-within-the-party. As is often the case in politics, this apparatus has acquired mythic proportions in excess of its actual clout.

A lot of day-to-day rebuttal and attack politics on the Labour side is in the hands of Tom Watson, the party’s official campaign coordinator, and his deputy Michael Dugher. They are often presumed to be Balls acolytes, a loyalty legacy from the old Brownite clan. The capacity to call on an internal patronage network within the party has traditionally been seen as one of the shadow chancellor’s great advantages - and something that ultimately makes him indispensible to Miliband.

As one party adviser puts it: “Ed Miliband didn’t have a machine when he became leader and he needed one.” Balls’s machine might not have been the most sophisticated, high-tech Nimbus 2000 of 21st Century political combat. It was nonetheless famously effective.

But the Balls-Watson relationship, I’m told, has soured very dramatically since the shadow chancellor started writing for and courting support from the Sun and the Sun on Sunday, newspapers controlled by Rupert Murdoch. Watson styles himself as Murdoch’s nemesis and his standing in the party has grown in proportion to the ferocity of his battle with News Corp. In that key respect, he has greater loyalty to Miliband, whose political stock is just as heavily invested in the moral crusade against Murdochism and all its nefarious ways.

Increasingly, I hear Labour people question whether the famous Balls machine is the force it once was. (Which probably explains why there is a bit more chatter directed against him, since fear of reprisal would once have kept criticism more muted.) None of this detracts from the essential fact that Balls remains one of the Labour party’s most experienced, intelligent and astute political operators. No-one disputes his formidable and acute grasp of economics and his capacity in politics, as one shadow cabinet colleague puts it, “to always see two moves ahead.” Aside from all the mythology, gossip and neurotic navel-gazing lower down the ranks, the shadow chancellor is someone who must be taken seriously and whose removal from the shadow Treasury portfolio could certainly not be undertaken lightly. That is why Ed Miliband appears not to be in any kind of hurry to do it and very probably won’t do it at all.

But as big a question for Ed Miliband as the matter of who delivers Labour’s economic message is the question of who will run the party’s general election campaign; who will craft the strategy, shape the message and ensure it is delivered in the right way? At the moment, the default would be the Watson-Dugher team. There are plenty of people in the party who think they might not be the ideal candidates. “It would just be ‘Tory tax cuts for millionaires’ on a loop”, says one sceptical party insider.

There is a growing clamour for Miliband to name a high-profile figure who will take strategic control of party’s offer to the country. Ideally, it would be someone of sufficient stature that the appointment would send a frisson of anxiety through the Conservative ranks. Do not be surprised if David Miliband's name soon starts floating around in discussions of this hypothetical vacancy.

The Tories have George Osborne fulfilling the strategic function and have recently put Lynton Crosby in charge at a more operational level. Opinion in Westminster is divided as to whether Crosby is a campaigning mastermind or a massive liability to Downing Street. Even the Tories themselves aren’t sure. But no one doubts that his main skill is in getting people focused and organised. He is a notorious bringer of discipline. (He helped secure Boris Johnson’s mayoral victories partly just by making sure his candidate took the whole process seriously enough and turned up to work on time.)

The Tories are starting to get properly organised for the battle of 2015. Labour needs to get its own machine tuned and oiled for combat. But whose machine will it be?

Labour Party deputy chair and campaign coordinator Tom Watson. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former 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.