Leader: The meaning of Ed Miliband’s “one nation” rhetoric

This could be Cameron's last chance to outline what he truly believes.

After winning the Conservative leadership in 2005, David Cameron astutely sought to present himself as a “One Nation Tory” in the tradition of Benjamin Disraeli and Harold Macmillan. Distancing himself from the excesses of That - cherism, he vowed to resurrect a gentler, softer Toryism, one that recognised that: “There is such a thing as society; it’s just not the same thing as the state.” Having acknowledged the potency of the One Nation philosophy, his biggest error was then to relinquish it so carelessly.

It was the conduct of Mr Cameron’s government that allowed Ed Miliband to claim this mantle deftly for himself in his speech to the Labour party conference. The Prime Minister once declared, in the manner of John Rawls: “The right test for our policies is how they help the most disadvantaged in society, not the rich.” His decision to abolish the 50p income-tax rate, despite having raised taxes on the poorest, proved otherwise. The phrase “We’re all in this together”, with its false promise of a shared burden, has not been heard since. The government’s reckless reform of the National Health Service and its unbalanced deficit-reduction programme have similarly deprived it of any claim to be a one-nation administration.

The Conservatives are now in retreat in those areas – the north, Wales and Scotland – that denied them a majority at the last election. The consequence, as we stated in July, is that: “It is Labour alone that can now claim to be the true onenation party: the party of the British nation.”

In recognising as much, the Labour leader has established a powerful test for his policies and those of the Conservatives: do they serve to build one nation or two? Mr Miliband vowed to create a one-nation economy, banking system and education system. Much more policy detail will be required if he is not to disappoint expectations but the ambition is admirable. If Labour is to be a “one-nation party”, it must also drastically improve its standing in the south of the country. As Vernon Bogdanor noted in last week’s New Statesman, south of the Severn-Wash line, outside London, it holds just ten of 197 seats. If Labour is to win back some of these it must, as Mr Miliband said, be “the party of the private sector as much as the party of the public sector” and the party of “the squeezed middle” as well as of those in poverty.

The Labour leader was also right to address the threat posed by the prospect of Scottish independence. In a resonant phrase, he warned that it would leave the country worse off, “not just in pounds and pence but in the soul of our nation”. Indeed, the break-up of one of the most successful multinational states in history would leave us profoundly diminished – economically, socially and culturally.

Challenged by the ever more confident Mr Miliband, Mr Cameron should use his party’s conference in Birmingham to outline finally what he really believes. His politics, a mixture of soft Thatcherism, shire Toryism and modish liberalism, has become less, rather than more, coherent with time. In the immediate term, economic revival remains the precondition for his political revival. After allowing himself to be guided by dogma, rather than evidence, he should now be entirely pragmatic and pursue those policies most likely to produce growth.

To date, he has responded to his political woes by adopting an ever tougher line on welfare, immigration and Europe. While this may appease his party’s recalcitrant right, it will not aid the construction of a Tory majority. In his speech, Mr Miliband said he understood why voters were willing to give the Tories “the benefit of the doubt” at the last election. The coming week could be one of the Prime Minister’s last chances to convince them that they were right to do so.

This article first appeared in the 08 October 2012 issue of the New Statesman, Conservative conference special

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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.