Liberal Democrat MP Lorley Burt walks on stage wearing a Nigel Farage mask at the party's spring conference in York. Photograph: Getty Images.
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Westminster is in thrall to the cult of Farage – but Clegg knows that most voters see through it

There are far more people who don’t vote Ukip than do, including many who despise pub-bore nationalism.

David Cameron has handled Ukip like an intimate rash. There was an itch he couldn’t help scratching but scratching only made it worse. Now he is trying to ignore it in the hope it will go away.

He certainly doesn’t want to talk about it. The Prime Minister aims to reach the general election in May 2015 without sharing a platform with Nigel Farage or even uttering his name. Downing Street hopes that Ukip’s popularity will peak at the local council and European Parliament elections this May, if not before. Meanwhile, Cameron’s strategy is to avoid gratuitously offending the party’s supporters.

For Ed Miliband, the relationship is more complex. His instincts are antithetical to those of Farage but their interests are tactically aligned. Currently, Ukip poaches more votes from ex-Conservatives than from disgruntled Labourites in vital marginal seats, so the longer the Farage phenomenon endures, the likelier it is that the Labour leader ends up in No 10.

To the extent that Labour has a strategy for dealing with Ukip voters, it is to sympathise with their rage while steering blame away from migrants and benefit claimants. A Labour government that guarantees jobs, higher wages and affordable homes is expected to neutralise resentment of foreigners for supposedly driving down pay and colonising council houses. That is a theory to explain when Farage might go away, not a campaign to see him off.

So there is a vacancy for someone who will confront the Ukip leader on his own terms. Nick Clegg has awarded himself that honour. The Liberal Democrat leader used a speech at his party’s spring conference on 9 March to express a brand of liberal patriotism celebrating a “modern, open, tolerant” Britain that tends to want to be part of Europe, as distinct from a fearful and reactionary blend of Little England nostalgia that wants out. Clegg will debate the merits of Britain’s EU membership with Farage live on television in April.

Lib Dem strategists are not expecting the party to be buoyed by some great surge of enthusiasm for Brussels. They note only that a liberal Europhile position currently polls better than Clegg (as do many things). Since the party shed much of its core support by forming a coalition with the Tories, it needs to recruit a new cohort of voters. Salvation depends on finding people who agree with Nick and just don’t know it yet.

This plan isn’t entirely delusional. Liberal dismay at the main parties’ craven response to Farage extends beyond the question of Europe. The Ukip leader has enjoyed privileged media status as a spicy character in an otherwise bland political drama and as the incarnation of public loathing of politicians. Fringe idiocy in Ukip’s ranks has not escaped ridicule but there is in Westminster a strain of self-hating deference to the party’s voters, as if their jaundiced view of modern Britain were more authentic than other political opinions. In reality, there are far more people who don’t vote Ukip than do, including many who despise pub-bore nationalism. Just as the Ukip leader wants to channel anti-establishment anger, Clegg wants to channel a cosmopolitan backlash against the cult of Farage.

It is worth a try. The Lib Dems have been supremely disciplined through successive local election ravages – but their patience is not infinite. Clegg has so far managed to avert despair with the argument that it is better to be harried in office than to be irrelevant in opposition. Since another hung parliament looks plausible after the next election, there is always hope of staying in power.

There are Labour and Tory MPs who assert with bitter confidence that Clegg, as a likely coalition kingmaker, has more reason than Miliband or Cameron to be sure of being in power after 2015. That calculation rests on the record of tenacious Lib Dem incumbents in fortified bastion seats bucking a national trend. It also presumes that, since the party has been bumping along the bottom for three years, the only way is up.

To sustain that story, Clegg needs to show some progress in May, although abject defeat would probably not provoke a leadership challenge. The party’s regicidal impulse, once so quick, has been numbed by the duty to look responsible in government. It would be roused only by a general election catastrophe.

It helps that expectations of Lib Dem performance are so low. Clegg’s office is happy to keep them that way. Senior aides present the debates with Farage in modest terms, as an opportunity to get a neglected pro-EU argument across, rather than some prizefight in which Europhobia might be dealt a knockout blow. At best, the Lib Dems hope to add a few points to their vote share over the coming months, dragging it into the mid-teens from single-digit ignominy and avoiding the eviction of every one of the party’s MEPs from Strasbourg.

Besides, Ukip support is about a lot more than Europe. Farage’s voters are recruited from across the political spectrum and animated by a complex of resentments, insecurities and prejudices. They nurture a feeling that politicians have conspired to turn Britain into a place that suits metropolitan elites. Clegg’s contention is that more people are happy with the current complexion of the country than Farage is letting on and that some of them are frustrated by what they see as tacit endorsement by Miliband and Cameron of the Ukip gripe.

The Lib Dems can’t realistically expect to convert that sentiment into enthusiasm for their party. They just need to borrow some votes in May to make a point. Or rather, by standing as the very opposite of Farage, they hope to bring some clarity to the enduring mystery in many voters’ minds of what might be the point of Nick Clegg.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 12 March 2014 issue of the New Statesman, 4 years of austerity

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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.