Show Hide image

The three straws the Tories grasp when they fantasise about a second term

Errant MPs herded into a ragged line by Lynton Crosby; paltry growth that is just better than nothing and Labour disarray.

If the Tories had set out in government with the aim of deliberately making themselves unpopular, they might not have proceeded very differently. What would a strategy for Conservative electoral suicide have required? The economy suffocated. (Tick!) The party brand painted in old contaminants: tax favours for the rich, public services cut, chaos in the NHS, boggleeyed tilts at European windmills, scowls for immigrants. (Tick!) The whole package seasoned with division, U-turns and incompetence. (Tick!)

Given that conditions are ideal for a rout, Labour’s difficulty in sustaining a doubledigit lead in the opinion polls is cause for discreet optimism in the upper echelons of the Tory party. The proximity of Ed Miliband’s tail lights is taken as proof that the race is not yet lost. Likewise, the persistent sight of David Cameron and George Osborne staring in the rear-view mirror is sufficient to bring on an attack of Labour collywobbles.

The past few weeks have been disorientating for the opposition. The ceremonial mourning of Margaret Thatcher allowed Conservatives to parade old economic and cultural victories as if they were freshly won trophies. The protocols of respect for the dead ended up polarising left-wing dissent between the modest and the distasteful.

Then, just as the Tories experienced a moment of solemn concord, Labour’s unity fractured. Writing in the New Statesman, Tony Blair warned Miliband (without naming him) against settling into an easy, lefty groove, in which the party is little more than “a repository for people’s anger”.

Blair’s intervention triggered a spasm of factional score-settling. In the past fortnight, Labour has looked like a chapter of some weird historical re-enactment society, playing out classic mid-Noughties battles in moth-eaten costumes, armed with a shoddy arsenal of briefings and smears.

Senior Tories are thrilled by this spectacle. It seems to confirm their calculation that Miliband is propped up by a fragile lattice of untaken decisions, stop-gap policies and unworkable ideological truces. All it takes to bring the edifice crashing down, in No 10’s view, is a sustained period of discipline among Conservative MPs and a glimmer of good economic news.

Neither of those conditions has been easy to procure so far, although the first of them – well-behaved backbenchers – looks less fanciful now than it has done for a while. It isn’t just solidarity in grief at Thatcher’s passing away that has brought Tory voices together in harmony. Lynton Crosby, Downing Street’s Australian campaign strategist, demands that MPs be loyal or silent. Many agree to be spoon-fed Crosby’s message because it is meaty enough on issues such as welfare and immigration to please the traditional Tory palate. They are also relieved that someone in No 10 seems focused on winning. The rest of the Downing Street machine is written off as a mediocre salon where Cameron’s dilettante chums are served by lumpen civil servants.

There is still a cohort of anti-Cameron Tories who accept defeat in 2015 as a stage on the road to the ideological purification of the party but these Tory Trots are a small minority. By putting the party on a more aggressive footing, Crosby appears to have persuaded some of the less dogmatic doubters to bury their grievances with No 10. “Even the people who are deeply unhappy with Cameron because he’s been rude to them or they’ve missed out on promotion are starting to understand that trying to change the leadership at this stage is a bit stupid,” says one Tory MP

That doesn’t mean the rebellious spirit is crushed. Cameron only ever wins respite from backbench pressure, never release. A massacre in local elections on 2 May could trigger fresh panic.

Discipline is a feasible condition for a Conservative revival, not a reliable one. Like everything else, it depends on the economy. No one thinks there will be a spectacular recovery by 2015 but Tory optimists expect sufficient growth next year – “anaemic but enough”, in the words of one Cameron adviser – to permit a campaign warning that Labour would turn the clock back.

It isn’t hard to find opposition MPs who fret about such a scenario but their leader dismisses it as a delusion. Tiny increments added to gross domestic product in 2014 will do nothing to ease the pressure on households struggling with low wages and a rising cost of living, Miliband’s allies argue.

Conservatives who claim that things are getting better will just be taunting voters with their complacency. “We’d like nothing more than for Tories to come out and start saying the economy is fixed,” a senior Labour strategist tells me.

For that reason, Conservative MPs are still under orders not to declare sightings of green shoots. Yet many privately think that this is their lowest ebb. They suspect that enough voters are resigned to austerity as a necessary hardship and don’t believe Labour when it says there is another, less painful way. They look at opinion polls and note that opposition ratings usually peak midterm and shrink as polling day nears. They sense that there is a civil war that Labour somehow failed to have in 2010 but that might still break out if Miliband’s lead can be made to shrivel into the margin of error.

In those circumstances, a second term for Cameron starts to look plausible. Errant MPs herded into a ragged line by the Australian attack dog; paltry growth that is just better than nothing; Labour disarray – it is neither an inspiring nor a sure strategy for a comeback, but these three straws are the only ones the Tories have to grasp.

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

This article first appeared in the 29 April 2013 issue of the New Statesman, What makes us human?

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.