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No wonder Tory ministers are off-message: not even Cameron knows what the message should be

The Prime Minister has never come up with an intellectually sustainable explanation of the economic crisis.

Would the UK Independence Party shut up shop if it achieved its goal of pulling Britain out of the European Union? Plainly not. Liberation from Imperial Brussels is the struggle that gave the party its name, but there is no end of suspected foreign mischief to sustain Nigel Farage’s partisan brigades in permanent cultural insurgency.

In reality, enterprising migrants create jobs, boost growth and claim proportionately few benefits. But Ukip has an ambiguous relationship with reality. It feeds on reasonable anxiety provoked by social and economic upheaval. It turns nostalgia for lost certainties into rage at the expropriation of indigenous entitlements. It comforts by denying theneed to adapt to the times, selling instead self-righteous victimhood at the hands of foreigners, bureaucrats, the metropolitan elite, proselytising homosexuals.

Fear and blame are vast resources at a time of economic crisis but it is a duty of mature, democratic politicians not to exploit them. That doesn’t stop the Conservatives from trying. In the aftermath of the Eastleigh byelection, in which Ukip pushed the Tories into third place, ministers have been lashing out at familiar foes. Iain Duncan Smith found himself anguished afresh at the scourge of “benefit tourism”. Meanwhile, Theresa May and Chris Grayling remembered their horror at the European Convention on Human Rights and their determination one day to prise it out of British law.

I doubt many Eastleigh voters went into polling booths wishing parliament would be more blasé about torture. It is true that the Ukip complex sees human rights as a European affectation in conflict with the common sense of Old Albion, but it does Conservatives no favours to be nurturing that view. The Human Rights Act will not be scrapped in this parliament. Whitehall lawyers, reasonable Tories and the Liberal Democrats will not permit it.

The only effect of the Grayling and May interventions is to tease grass-roots Tories with something they want but can’t have as long as David Cameron is in Downing Street – an invitation to continue supporting Ukip as the Real Conservatives in Exile.

Cameron’s response to the by-election humiliation was a promise not to “lurch to the right”. The mixed message cannot have been co-ordinated. The No 10 communications operation is often criticised for lacking consistency but no one thinks it is so incompetent as to launch a two-pronged attack with the prongs facing in opposite directions. The better explanation is that Cameron is losing control of ministers much as he lost control of his backbench MPs.

Some of the more moderate voices around the Prime Minister have long been frustrated with May’s clunky illiberalism, especially where immigration policy is concerned. There are ministers and aides who recognise that a policy of snarling hostility to foreigners harms Britain’s reputation as a country open for business to the rest of the world. It does nothing to advance the UK’s position in the “global race”, which is supposed to be Cameron’s governing purpose. For now.

Tory MPs don’t anticipate the global race selling any better on the doorstep than “the big society”, which was the Conservative leader’s unwavering ambition before he wavered. Yet there is a deeper problem with the theme, which is that the Tory account of Britain’s economic plight, as set out before the 2010 election, was the opposite of global. It was insular and parochial. Cameron explained with lethal simplicity how Labour had spent all the money – maxed out the credit card – and how only national belt-tightening could lead to recovery. He and George Osborne are now learning that international forces determine whether the UK economy grows or shrinks. Their problem is that a message crafted out of that insight sounds like a lame excuse for failure – the very charge that was levelled against Gordon Brown when he talked about a global crisis.

It is an error of category and chronology to see Cameron’s dilemma after Eastleigh as a choice between holding a centre course or lurching to the right. The lurch was already made back in 2008, when the Tory leadership failed to grasp what was happening in the financial meltdown and reached for glib answers that obscured the truth. They didn’t see it then as a crisis of globalised market capitalism and have never come up with an intellectually sustainable explanation of what else it might have been.

It shouldn’t come as a surprise when malfunction in an internationalist, liberal system produces illiberal, populist backlash.

There is a cultural nuance and presentational sophistication to Ukip that allows it to reach beyond the old skinhead model of the far right, but that doesn’t mean it isn’t ultimately a nationalist party, committed to the politics of pulling up the drawbridge, vilifying outsiders and purging enemies within.

Before the crisis, Labour, the Liberal Democrats and the Tories were all supporters of the elite, cosmopolitan, pro-globalisation consensus; their leaders voiced no reservations about the model until it failed. Owning up to that error and developing a plausible alternative is a slow and difficult process for any politician who wants to govern responsibly. For those who don’t, there is a quicker and easier route. It involves peddling simple solutions based on prejudice and fear. Cameron insists that the Tories aren’t in that trade; all the evidence says otherwise.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

This article first appeared in the 11 March 2013 issue of the New Statesman, The audacity of popes

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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.