For the good of himself, his family and the party, it’s time for Ed Balls to fall on his sword

It’s time the shadow chancellor fell on his sword, argues Anthony Seldon. Ed Miliband would be stronger for it, Labour would lose the taint of tax and spend, Yvette would be pleased . . . and even Balls might benefit.

The co-author of “Brown at 10” writes an open letter to the shadow chancellor:

Dear Ed,

I was not your headmaster, but as somebody who has written about you for many years it falls to me to say this: the time has come for you to fall on your sword.

After 20 unbroken years at the heart of politics, you need a rest. It was another age when in 1993 Geoff Mulgan, anxious to leave Gordon Brown’s side as chief adviser to found the think tank Demos, recruited you as his successor. After leaving Oxford, you had only the briefest time to work as an academic and a journalist on the Financial Times. You need to see more of life beyond the microworld of politics. Falling on one’s sword is never easy. However, quitting in the next few months until, say, 2017 would undoubtedly benefit your leader, your party, your wife and even yourself. Let me explain.

Ed Miliband would be a much stronger leader without you. He may think he cannot live without you, which is why he promoted you in January 2011 to shadow chancellor and recently pledged to stick with you. Yet he doesn’t need you, any more than Tony Blair needed Gordon Brown after a while: he merely couldn’t find it in himself to squeeze the trigger.

Forgive me, but you stop Ed breathing fresh air. With you close to him, his breath will always be stale and smell of a toxic brand. Without a prolonged period out of the public eye, neither you nor the party will ever rid yourselves of the opportunistic, negative and bullying image of the Gordon era. Yes, we both believe he was a better prime minister than the conventional wisdom says but it will take years for his achievements to be recognised properly and the stain of his modus operandi will never be eradicated.

Economic credibility would be more readily restored with your departure. Your critique of the government’s austerity strategy may never win back public trust and your proposals for the economy will never convince. Your credibility problem will only become magnified as the general election approaches. On Europe, despite your recent about-turn, the party will find it easier to commit to holding a referendum with you gone. Your patrician attitude not to trust the people will always make any call for a referendum from you sound hollow. Think how strong the appeal would be if Miliband offered the referendum that neither Blair nor Brown dared.

Without you, Labour could present itself as a clean party, free of the factionalism and brutalism that so tarnished it when Brown was boss and you were his consigliere. I know that you think you were really a very nice person all along, vulnerable with your own insecurities. Yet you need to redeem yourself and the atonement will never happen unless you disappear and return to public life with a fresh persona. The party would be more inclusive without you.

You say you like David Miliband, but his followers are not doing well under Ed, are they? The party would be much stronger with David back in the frame. So, too, would it with Alistair Darling returning to the front bench. In the event of a hung parliament, Labour would stand a better chance of putting together a workable coalition with the Lib Dems without you. Remember how in 2010 the Lib Dems didn’t trust Gordon or you? Nothing has changed, Ed.

What might you do during your long sabbatical? You have extraordinary intellectual and personal gifts. You could write a book (not, please, a memoir), as your mentor Gordon Brown did in 1986, about the Scottish politician and leader of the Red Clydesiders James Maxton. What about a biography of Brown? Not Gordon, nor your friend Nick, but George: you would learn much more about how factionalism damaged Labour in the 1960s. How about returning to academic life or journalism? Your experience would richly inform students and readers. What about a stint at a school? You would turn up your nose at Wellington College because we are independent, but how about our academy, Wellington in Wiltshire, founded when you were schools secretary? You could even study for an MBA and learn, unlike many others who become ministers, how to run large organisations.

I wish you’d listened when you ran education and I suggested that your two great opportunities for a legacy were to embed well-being deeply into schools and transform the relationship between the public and private sectors. You did little on either and it’s rather hard to remember much that you achieved of enduring benefit for young people. So it would be good to learn how to run an organisation. You could even run or work for a charity, as John Profumo did after his involuntary retirement from politics 50 years ago.

Yvette would not say it to you but, like many women working in the same organi­sation as their husband, she would be freer to think and act without you in her hair. You would have more time, too, for your three children. As a headmaster, I know how hard it is for children who have just one parent in the public eye. Having two is harder still and your family would only benefit with you being more present and less preoccupied.

The greatest beneficiary would be you. You may not see it this way now but I know you will in hindsight. A mentor of mine, Robert Skidelsky, suggested to your mentor Gordon that he take a sabbatical before becoming prime minister. Had he followed that advice, his premiership would have benefited. He would have had time to think through what he wanted to do with the power he had so long craved. As it was, he came to No 10 with the cupboard largely bare. If Labour loses in 2015, you will be blamed and your career will be damaged beyond repair. If it wins, you would return to the front bench in 2017 a redeemed and respected figure. You might even one day become leader, your long-held ambition. Oh, and don’t believe that guff about “skipping a generation”. The public will tire of young leaders, though it doesn’t yet realise it.

Others, including Ed Miliband, share responsibility for the Brown errors: you will earn praise for taking the hit. You are 46 this month. Your best years could lie ahead of you.

Yours ever, Anthony


Shadow chancellor Ed Balls delivers his keynote speech to delegates at the Labour Party Conference at Manchester Central on October 1, 2012 in Manchester. Photograph: Getty Images.

This article first appeared in the 25 February 2013 issue of the New Statesman, The cheap food delusion

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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.