The political dangers of Miliband's "new approach" on immigration

By declaring that low-skilled immigration is "too high", Miliband risks entering a war he cannot win.

Ed Miliband has long regarded immigration as one of the issues that Labour mishandled in office. The last government was wrong, he has said, not to impose transitional controls on migration from eastern European and wrong to then casually dismiss people's concerns.

After delivering two speeches on immigration since he became Labour leader, Miliband will tonight devote a party political broadcast to the subject (which you can watch below), with a speech by shadow home secretary Yvette Cooper to follow tomorrow. The interventions will inevitably be seen as a response to the party's poor performance in the Eastleigh by-election, where, in the words of one Labour MP, immigration was "the single biggest issue on the doorstep", and as a response to the Tories' political manoeuvring. But I'm told by a Labour source that it has been on the grid for some time. That seems plausible. As will be clear to anyone who has studied Miliband's leadership, he doesn't do knee-jerk policy, he doesn't "lurch". And political parties do not plan and deliver PPBs in just six days.

To a string-laden soundtrack, Miliband begins the broadcast by again stating that Labour got it "wrong" on immigration, a sign that he believes the party needs to rebuild trust on the issue before it can hope to win a fair hearing. He says: "One of the things we didn’t get right was immigration and that’s why I’ve got a new approach.  Millions of people in this country are concerned about immigration and if people are concerned about it, then the Labour Party I lead is going to be talking about it."

He goes on to argue that "low-skill migration has been too high and we need to bring it down", calling for "the maximum transitional controls for new countries coming in from eastern Europe". But rather than promising a crackdown on allegedly benefit-hungry migrants, as the Tories have, he again promises to crackdown on rogue employers who use migrant labour to undercut domestic workers. Miliband refers only to the need for tougher enforcement of the minimum wage but Cooper will supply more detail tomorrow when she announces plans to make it illegal for bosses to house migrants in unsuitable accommodation, such as mobile homes, and to extend action against gangmasters employing illegal migrants in social care, hospitality and construction. 

In the PPB, Miliband also cites the need to improve training for domestic workers, "so that they have a fighting chance of filling the vacancies that exist", and to ban recruitment agencies who only seek to employ people from abroad. 

Miliband's class-based analysis of immigration is a significant improvement on the populist "British jobs for British workers" rhetoric of Gordon Brown. But perhaps inevitably, the broadcast raises more questions than it answers. Having argued that low-skilled migration (as opposed, presumably, to high-skilled immigration) is "too high", how confident is he that the measures Labour is proposing will reduce it? Miliband has rightly rejected the government's focus on "targets" but this decision will prompt some to question his commitment to reducing new arrivals. 

We can also expect the Tories to challenge Miliband to say what action (if any) he would take to restrict migrants' access to the welfare state. Asked earlier this year whether he was willing to consider restricting benefits for EU immigrants, Miliband said: "Of course that's an issue that should be looked at, the length of entitlement to benefits and how quickly people can get them. All of these issues should be on the table." More recently, however, he has accused the government of "windy rhetoric", urging it to  focus instead on tackling rogue employers. As the coalition prepares to announce specific proposals, where does Labour actually stand?

Miliband's approach raises the possibility of a more progressive conversation about immigration. But with his declaration that immigration, or at least one form of it, is "too high", some in Labour fear he has entered into a war that he cannot possibly win. 

Ed Miliband's party political broadcast on immigration will be shown on BBC1 tonight. 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.