Where are the Milibandites when Ed needs them?

The Labour leader has to look like the head of a movement when he takes on Unite, not a lone crusader.

Political leaders are never short of unhelpful advice in a crisis. Wherever Ed Miliband turns he is told that he must be bold, that his actions must be decisive, that this deadly row with Unite and Len McCluskey could also be an opportunity, containing the seeds of renewed leadership and status.

I wrote something to that effect at the end of last week. Shortly afterwards, the messages started to come in from people who want Ed to succeed – aides and loyal MPs – saying, in effect, “yes, fine, but what?” Good question. Difficult question. A moment to reflect on how hard it is being leader of the Labour party.

Miliband’s team know they need to take charge of the situation. They know this is becoming a defining moment in the Labour’s leader’s bid to become Britain’s next Prime Minister. They know the outcome they need is Miliband emerging stronger, more clearly defined in the public imagination as a man not to be underestimated – a man whose hidden steel is revealed. What isn’t clear is how they get to there from where they are now.

The first thing they need to settle is the parameters of the battlefield. Is Ed Miliband’s leadership going to be proven in his capacity to deal with the small matter of alleged vote-rigging in Falkirk or the larger question of Unite’s explicit political strategy to influence Labour by exerting its financial and organisational muscle in candidate selections? Len McCluskey denies there was anything wrong with the Falkirk process. That is true, I suppose, once you accept that the job of getting as many Unite-dependent MPs in parliament overrides any other consideration of best practice. According to a solid Leninist ends-justifies-the-means view of the situation, Falkirk is, as some Unite officials declared it, “exemplary”. However, in terms of expressing the kind of political organisation Labour wants to be and be seen to be, Falkirk is a monumental disaster. As one party insider put it to me the other day, “the choice now is between open and closed. It’s two different kinds of politics.”

So Miliband needs to be clear about whether he is trying to close an institutional loophole or change an institutional culture. His article in this morning’s Observer suggests it is the latter, which is entirely the right choice. He makes the connection between Falkirk and general public alienation from politics. He makes the point that the main challenge for the wider labour movement is making itself relevant to successive generations of workers who may not be members of trade unions. So far so good.

Miliband also says Labour should “mend, not end” its link with the unions. That too is a sensible position to take. It is the only realistic option. The Labour leader is walking along a narrow ridge. On one side is the danger of capitulation to the McCluskey agenda, accepting that union money has a veto over party reform. But on the other side is the danger of embracing a definition of leadership cooked up by Labour’s enemies in the Conservative party and the Conservative press. They will set tests of aggression towards the unions that he will never pass, while vandalising his support base in the attempt. How well he navigates this challenge will be decided by the definition he chooses for the word “mend.” You can mend some things by covering them in gaffa tape. Or you can take them apart and put them back together again. I sense in this situation a major institutional revision is in order. Ironically, one test of its effectiveness may turn out to be creating a system that, had it been in place in 2010, would have led to a different outcome in the Labour leadership contest. Miliband may not like that feature of the debate, but he would be unwise to ignore it completely.

The Labour leader thought Len McCluskey and Tom Watson were on his side. It is clear they were not. Miliband’s real friends are the people who now come out clearly and visibly to say without equivocation that the culture inside the party must change and that they believe Ed is the man with the requisite moral judgement and political capability to do it. At the moment, there are not too many of those people around. When David Cameron gets into trouble he can normally rely on some cabinet heavy-hitters and retired big beasts to intervene on his side. (When John Major is on the Today programme it is normally a sign that Downing Street is feeling besieged.)

Who are the equivalent people closing ranks around Ed Miliband? He has lost the protection of the old Brown machine and the old Blair brigade is watching from the wings mouthing, “we told you so”. The Labour leader has supporters in the party. There is no shortage of MPs who wish him well and want him to succeed. They all do, to the extent that they want a Labour government and Miliband is the only leader they’ve got. The vital missing component from the project has always been the sense of a movement larger than Ed himself – the aggregate charisma of a bunch of people who are easily and clearly defined by shared purpose and shared belief. Three years after the election it is still hard to identify a prominent and powerful phalanx of ardent “Milibandites”. If they are out there, they now need to make themselves heard. Their leader needs them.

Ed Miliband. Photo: Getty

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

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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.