Cameron's Ctrl-Alt-Del on frozen party relations

A bunch of new appointments and a more aggressive tone indicate that the Tories' campaign for re-election has already started.

Are the Tories getting their act together? In my column for this week’s magazine I note that there is a strain of optimism surfacing in the Conservative parliamentary party. It has a number of elements. There is new solidarity forged in collective mourning for Margaret Thatcher. Labour look disoriented and increasingly divided. And, crucially, there are portions of red meat being doled out by Lynton Crosby, the pugnacious No 10 campaign chief, to keep backbench tummies from rumbling angrily.

David Cameron, it seems, has also finally taken to heart the accusation that he neglects his party, choosing to float presidentially above the fray, thinking a bit too much about statesmanlike preening and not enough about securing a Conservative victory. Tory rebellion this parliament has often had an ideological impetus but it has also been exacerbated and prolonged by personal animosity towards the Prime Minister. There are MPs who feel slighted, passed over, sneered at and generally unloved. Cameron can’t do much about the hard core of ultra-zealous dogmatists who pray for his defeat – the Tory Trots – but there aren’t enough of those to finish him. He can, meanwhile, launch a charm offensive with the rest of the party.

Much has been made of his collegiate behaviour in the weeks of Thatcher mourning – sending friendly notes to MPs, raising a glass in tribute in the Commons bars; taking tea with the troops. Tory parliamentary flesh is being systematically pressed by the leader for the first time many can remember.

There have also been notable appointments. Before the Easter break, John Hayes, a bumptious Tory traditionalist with a direct channel to some of the ruddier-cheeked corners of the parliamentary party, was moved from the Energy department (where his scepticism about climate change was causing mayhem) to become a “senior” Cameron aide.

Now Jo Johnson (Boris’s younger brother) has been named as the new head of the No 10 policy unit. Johnson is respected across Westminster for his moderation and intelligence. He doesn’t have the flamboyance of his elder brother but that doesn’t mean he is any less ambitious. One credential that has raised a few eyebrows is the widespread suspicion that Johnson is a bit of a Europhile. That, in the words of one (more explicitly “out”) pro-European Tory is “the love that dare not speak its name” in the party, so it is hardly surprising that Johnson’s pragmatic inclinations towards Brussels are not worn on his sleeve. His private views are described to me as “eminently sensible; he gets it” by someone in Westminster whose approval would be considered a mark of disgrace by serious Tory eurosceptics. That could cause problems down the line.

Separately, a new policy “advisory board” has also been created, with input from a diverse range of MPs including veterans and 2010 newbies: Peter Lilley, Nick Gibb, Jesse Norman, Margot James, Peter Uppal, George Eustice. There are reports that Steve Hilton, Cameron’s old head of strategy will be involved – although that makes the whole thing look as much like a ruse to get people talking about a grand gathering of the Tory tribe as a substantial new institution. Hilton is not one for sitting comfortably on committees of any kind; Cameron is not really one for listening to them.

Of the MPs brought in to advise the PM, perhaps Norman is the most remarkable. He co-ordinated last year’s rebellion against House of Lords reform, for which he was rewarded with a ferocious bollocking from the Prime Minister and exile to political Siberia (“the new honourable member for Vladivostok East,” as one of Norman’s friends joked at the time.) Norman had once been considered a rising star and a shoo-in for a government post. After the Lords reform episode a No 10 insider told me that “Jesse Norman will never get a job in government under David Cameron.” That the ban looks to have been lifted is evidence that what we are seeing is a very deliberate, thorough effort to reset the leader’s relations with his party.

Will it work? We have been here before, notably after Cameron’s big European speech, when the Tories looked gleefully united for all of a week before talk of a leadership coup emerged. Nonetheless, this feels slightly different. There is a clearer and more explicit recognition among MPs that party discipline, coupled with a hint of good economic news, would put more pressure on Labour at a time when the opposition’s unity looks more brittle than ever. Again, Crosby’s influence here is crucial. A perennial criticism of the Cameron operation has been that it is not party political enough; that it likes the trappings of power but lacks a ferocious appetite for blood.

George Osborne has a relentless political game-playing impulse but he has a day job trying to run the economy. What has been missing, say some Tories, is the feeling that there is someone inside No 10 who wakes up every morning thinking about nothing other than how to hurt Ed Miliband and deliver a Conservative majority. That person, they now say, is Lynton Crosby. What he has done, in effect, is set the party on a war footing with suitably aggressive messages, triggering a Tory loyalty reflex. More than one Conservative has said to me in recent weeks “the campaign has started already.” They don’t mean the vote for county council seats on 2 May. They mean the big one in May 2015.

David Cameron tweeted this picture earlier of his new policy board, including Conservative MPs Jo Johnson, Jesse Norman and Margot James.

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.