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For Ed, it’s Prim up north

The Londoner has a Yorkshire rebellion on his hands.

Londoner Edward Miliband has a Yorkshire rebellion on his hands. Trade union tykes on the party’s national executive committee, led by Unison’s speaks-her-mind Wendy Nichols, gave him a reet ear-bashing over the exclusion of White Rose county folk from the controversial Rotherham by-election. Nichols complained of anti-Yorkshire discrimination, citing Doncaster where one of the town’s MPs is a leading light in the capital’s Primrose Hill Labourati: Ed M himself. Mili waffled nervously, my informant recounted, as half a dozen on the NEC had a dig. Sarah Champion from Derbyshire duly won the potentially tricky Rotherham contest for Labour, but not before the hospice manager, a member of the party for all of two years, was ordered to change her script. Telling voters that “Rotherham needs respect” was judged risky when George Galloway’s Respect was standing a candidate of its own.

Who is David Cameron more afraid of – Hugh Grant and Steve Coogan or Paul Dacre and Tony Gallagher? No 10’s calculation, whispered a Tory snout, is that the Prime Minister needs the Daily Mail and Torygraph on his side more than he does a couple of hacked-off actors. Raw power made Leveson a Downing Street no-brainer.

I see onetime chorister Chuka Umunna is hosting a “Festive Media Reception” in place of the usual Christmas drinks and nibbles. Sounds very One Nation Labour. I like to think this column’s leg-pulling, after he invited an elite few to a summer soirée, persuaded the shadow biz sec to issue a general Decembrist welcome to Her Majesty’s Disloyal Lobby. Some things, however, never change. The Ambitious One is staging the glitzy event in the grand Smeaton Room of the Institution of Civil Engineers. And he’s persuaded a City firm to sponsor his wine and canapés. Ed Miliband, perhaps next-generation Rachel Reeves too, should beware.

Coincidentally, junior political scribblers uninvited to Umunna’s summer bash have formed a dining fraternity of their own. The young pens call it the Lower Rung Club after a suggestion of Future Political Editors’ Club was judged both vainglorious and provocative to the lobby boss class. To underline the belowstairs status of members in hierarchical Westminster journalism, hacks face expulsion from the club if Cameron’s Miss Moneypenny, Gabby Bertin, ever deigns to return a telephone message or Dave calls them by name at a press conference.

Tory chief scaredy-cat Michael Fabricant took some stick after waving his Europhobic white hankie in the direction of Ukip. Labour MPs exploited mercilessly an opportunity to wig Mickey for what resembles a mannequin’s head dressed in one of Barbara Windsor’s luxurious hair pieces. Hansard stenographers dutifully turned a deaf ear to a Labour barrage about fringe politics, partitions and partings. Fabricant grinned and bore it, doubtless eager to prove he’s an authentic Tory not a Whig.

Deepening austerity and desperation is forcing supermarkets, an MP with a seat in northern England assured me, to relabel food. On shelves, sell-by dates are replaced with steal-by limits.

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 10 December 2012 issue of the New Statesman, Greece: a warning for Britain?

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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.