Nick Clegg speaks at the Liberal Democrat spring conference in York last month. Photograph: Getty Images.
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The progressive Lib Dem policies that no one knows about

How many know that the party still aspires to abolish tuition fees and plans to review the bedroom tax? 

When I wrote last week that Lib Dem MPs who had supported party policy by voting against an increase in university tuition fees were likely to receive some sort of credit for this from the electorate in 2015, a senior political journalist asked me if I hadn’t got that the wrong way round – that surely the rebels had voted against party policy?

But in fact this wasn’t the case. Lib Dems who trooped through the lobby supporting the government were in fact the actual rebels, whereas those who voted against the government were - in party terms – bowing to the will of conference and towing the line. Indeed, party policy is to review the system after next year's election with a view to abolishing tuition fees altogether. A fact that I suspect eludes most people.

And there lies the biggest issue for the Lib Dems at present. If senior political correspondents get confused about the minutiae of party policy, what chance for an electorate where nine in 10 voters fail to recognise a photograph of the Secretary of State for Defence, and the Foreign Secretary frequently gets confused with Ross Kemp?

We saw another example of this type of contradiction the other day on the bedroom tax. You might imagine that the bedroom tax enjoys the support of the Lib Dems, but in fact party policy is to review it, Nick Clegg has ordered said review and when you know that, suddenly Tim Farron's intervention against the tax last week all makes sense. Or at least, it makes sense until 24 hours later the majority of Lib Dem peers end up supporting it.

It’s almost like we want to confuse people.

It is into this vacuum that well-written and provocative contributions like Jeremy Browne's new book get confused with party policy and a set of proposals, approved by conference, ready to present to the electorate as a programme for government. And before you know it, you’re being asked whether it's true that the Lib Dems will cut the top rate of tax for the rich on the day that we take thousands more at that the other end of the scale out of income tax altogether. Which doesn’t help. And that’s not Jeremy’s fault – it’s his job to say what he thinks.

The next month will see Lib Dems campaigning hard on one policy that we are both clear about and well known for – our support for the UK’s membership of the European Union. But after that, we need to start filling in the void on every other policy area – because we’ll have just 12 months to tell people what it is we actually believe. 

At the moment – EU and the Mansion Tax aside – I’m not sure many people actually know. 

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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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.