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Commons Confidential: Dave the party pooper

The battle of the Christmas drinks parties.

“The Prime Minister requests the pleasure of the company of Kevin Maguire . . .” So read the invitation to Downing Street meeja drinks. Pleasure? I doubt it. More necessity when David Cameron’s bidding was extended to the Westminster lobby, of which yours truly is a member. But Flashman must really hate Ed Balls. The hastily arranged No 10 reception coincided with festive drinks announced a fortnight earlier by the shadow chancellor. The Buller Boy hoped to lure hacks away from an opponent who constantly winds him up with hand signals. Downing Street’s Mr Temper Tantrum is still furious he was rebuked by the Speaker for calling Balls a “muttering idiot”.

I gave George Osborne’s kids’ Christmas party at No 11 a wide berth. Osborne posing, all avuncular, with kids of political hacks while grabbing cash from hard-pressed families would’ve been too much to stomach.

The joy of working in the Palace of Westminster is what you hear from bumping into people. This year’s initiation ceremony to join the Bullingdon Club, disclosed an Oxford student who has a chum in that oafish society, was to burn a £50 note in front of a beggar. I wonder if Dave and George, Boris, too, swell with pride, recalling how they were all into this hooray henrying together before imposing austerity on low- and middle-earning Britons.

The Tory Boy Andrew Griffiths, one of Cameron’s arrogant young thrusters, sounded a tad delusional during the Christmas bash of the all-party Beer Group. Jonathan Neame, boss of family brewing firm Shepherd Neame, recalled with contentment how “James Bond now has a beer instead of a dry Martini” in Skyfall. Heineken poured a lot of money into that product placement. Immodest Griffiths responded with a statement of such superfluous conceit, it was more Johnny English than 007: “I want to quash the rumour that even though James Bond is a beer drinker I’m going to be the next James Bond.” I’m sure Daniel Craig would like to end any idle speculation that he may stand for parliament in Burton.

Demands from constituencies and charities for raffle prizes of bottles of whisky, often signed by the PM or a party leader, are an occupational hazard for MPs. The £30 cost is unclaimable on expenses and the annual bill runs into hundreds of pounds. Steve McCabe, the genial Birmingham Selly Oak MP with a burr unsmoothed by 35 years out of Port Glasgow, told a tale of a Scottish Labour comrade with a reputation for parsimony. The MP retired and his successor willingly supplied whisky for a fundraising draw. “Och, ah see they now dae full size bottles,” observed the local worthy. The new MP asked: “Whit dae ye mean?” “Yer predecessor,” answered the worthy, “said they only sauld miniatures in the Commons.”

Tories in Clacton voted for a five-year residency criterion before people moving into the area qualify for support. A case of The Only Way Isn’t Essex? Most Clacton residents seem originally from London anyway.

Kevin Maguire is associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 24 December 2012 issue of the New Statesman, Brian Cox and Robin Ince guest edit

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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.