Show Hide image

Miliband needs a Gould memo

Labour is being outfought and out-thought by the Tories. Someone needs to tell its leader.

In 1995, just as people were beginning to get their head round the fact Labour was heading for government, a memo popped up from Philip Gould telling them they were wrong. Focusing on Labour’s internal organisation, Gould warned that Labour’s strategists were dangerously uncoordinated. What was needed was “a unitary command structure leading directly to the party leader”. Amid cries of “control freakery”, this rigid command structure was duly established. And the rest is history.

Ed Miliband urgently needs his own Gould Memo. Labour is being outfought and out-thought by the Tories. The big strategic battles are starting to be won – with relative ease – by the coalition. Welfare, Europe and the economy, (which should be a slam-dunk for Labour), have all been ceded to the coalition.

There are several reasons for this. The Conservatives, aware they made a mistake writing off Ed Miliband early in his leadership, have gone on the offensive. Ministers are finally allowing David Cameron to build a fragile firewall between his government and the crises of last summer, the so-called omnishambles.

Yet the biggest problem is that Labour’s top team is not sufficiently organised to meet the new Tory threat.

“Ed’s got some good press people and he’s got [Jon] Cruddas trying to sort out policy structures,” said an insider, “but there’s no one to manage political strategy. No one’s saying, ‘Well, we could say this and get a good headline in the Mirror tomorrow, or we could say nothing and get a dozen good headlines in two and a half years’ time.’”

There are a number of people within Miliband’s inner circle who could qualify for that role. There is Tim Livesey, his chief of staff; but while Livesey is respected for his organisational skills he is widely regarded as insufficiently “political”. Another candidate is his senior adviser Stewart Wood, but his strengths lie in policy and he is seen by many in the shadow cabinet as a political theorist rather than a strategist.

Miliband himself relies heavily on the counsel of his old flatmate Marc Stears, but Stears is perceived by some as too academic and insufficiently willing to challenge his lifelong friend. “Ed uses Marc as a political comfort blanket,” says a source.

Another high-profile candidate is Tom Watson, the barbarian who single-handedly tore down the gates of the Murdoch citadel. But there are some people who question whether Watson has the appetite or discipline for such a role. “When you’ve got used to turning up in restaurants and having people like Dustin Hoffman sending over a bottle of champagne, strategy meetings can become a bit dull,” an MP told me.

The person who many shadow cabinet members agree would be best suited for the role is Michael Dugher. Gordon Brown’s former spokesman is well regarded – and liked – across the political spectrum, and is seen to have a killer instinct, aligned to the judgement about when to use it.

“Dugher would be perfect,” says a shadow cabinet source, “but what he needs is for Ed to give him the formal authority to start pulling things together.”

It would require Dugher to adopt a lower profile, start tweeting a little less about curries and Yorkshire puddings, and tone down the pretence he’s just emerged from a Barnsley pit-head. But he could yet be Ed Miliband’s Philip Gould.

And Miliband needs him. 


This article first appeared in the 04 February 2013 issue of the New Statesman, The Intervention Trap

Show Hide image

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.