Scottish Labour leader Jim Murphy speaks in Glasgow after his election on 13 December, 2014. Photograph: Getty Images.
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Jim Murphy unveils plan to rewrite Scottish Labour's Clause IV

New leader emulates Tony Blair by announcing five new principles for the party's constitution, including commitment to patriotism. 

Twenty years ago, Tony Blair stunned the political world by declaring his intention to rewrite Labour's hallowed Clause IV and end the party's formal commitment to mass nationalisation. The move, endorsed at a special conference in 1995, was a defining point in the birth of New Labour. Ever since, leaders of all parties have been challenged to display similar daring and achieve their own "Clause IV moment".

Today, following his election as Scottish Labour leader last Saturday, Jim Murphy will seek to do quite literally that by vowing to rewrite Clause IV of his party's constitution. Mindful of Scottish Labour's tarnished reputation, which allowed the SNP to win majority control at Holyrood (and to surge in the polls), the former cabinet minister is attempting to redefine his party's purpose for the post-referendum era. He will say in a speech in Glasgow:

Once Labour’s challenge was that too many people felt they could not be Labour and make an aspirational choice.  Today Scottish Labour’s challenge is that some people feel they can’t be Labour and make a patriotic choice. The change we need goes deeper than the leadership style of a new team. If this is to be a genuinely fresh start for our party we need to make more fundamental change.
That is why I can announce that I will ask Scottish Labour’s Conference in March to agree a new 'Clause IV' for our Scottish constitution. A new statement of purpose for a new generation in the Scottish Labour Party. It's the biggest change in Scottish Labour's history. This is a 'Clause IV' moment for a different time and a different purpose. Tony Blair rewrote Clause Four of UK Labour to bring us closer to the centre of politics. I want to rewrite 'Clause IV' of Scottish Labour to bring us closer to the centre of Scottish life.
Murphy will go on to outline five principles for the new Clause IV. They are:
1. Making it clear that Scottish Labour is a "patriotic party"
Murphy will say: "One: we will make it clear that we are both a democratic socialist party and a patriotic party. We are a socialist party yes, but we recognise that our political faith grew out of something deeper which is ingrained in our Scottish character. It was there before our party in the ethics of Burns' poetry, the economic vision of New Lanark, the actions of the Highlanders who took on brutal landlords. A belief that we stand together, look after those who need our help, and make sure that everyone gets a fair shout." 
2. Declaring Scottish Labour a party that "represents Scotland first"
"Two: while we do not give up on our belief in active solidarity with people across the United Kingdom and around the world, we will make it clear that this is complementary to, and not in conflict with, the national interest of Scotland. 
"We will declare ourselves a party that represents Scotland first, and where, as Scots, we work with others to achieve the potential of all."
3. Committing to "total devolution" of policy making in devolved areas
"Three: we will set in stone the total devolution of policy making in devolved areas. Policy will be made in Scotland, for Scotland, by our Scottish Party, putting the needs of Scotland first."
4. Committing to a "permanent and powerful" Scottish Parliament
"Four: we will make the same commitment in our own party constitution, as the Smith Agreement did in the UK Constitution, to a permanent and powerful Scottish Parliament."
5. Renewing Labour's mission for "a more equal and fairer society"
"And Five: we will renew our historic mission for a more equal and fairer society where power, wealth and opportunity are more fairly shared by our fellow Scots and our fellow human beings around the world.
"This will represent the refounding and rebirth of our Scottish Labour Party.  
"A clear statement of our party’s beliefs. A changing Scottish Labour Party for a changing Scotland."
These principles are designed to draw a distinction between patriotism and nationalism (number one), to answer former leader Johann Lamont's charge that Scottish Labour was merely a "branch office" of Westminster (number two and number three), to enshrine the party's commitment to further devolution, including the full transfer of income tax (number four), and to reaffirm its egalitarian values. 
With the SNP 20 points ahead of Labour in Westminster voting intention, a lead that would cost Labour 34 of its 40 seats, the scale of the task facing Murphy is daunting. But with the promise of a new Clause IV, he has shown the kind of imagination and creativity that will be required in the months ahead. 

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.