We should feel for feckless Fergie

The Duchess of York is back in the news and back in trouble. Despite the humiliation of the cash-for

For those of you who have not had the time or inclination to catch up, Sarah Ferguson was filmed by the News of the World on 18 May offering a fake businessman access to Prince Andrew, who is a UK "trade envoy", for half a million quid. Oh Sarah, Sarah, the first rule of public life: don't trust Arab businessmen who wine you and offer you cash for indiscretions! In a hotel room! Where cameras can be hidden! Didn't the royal family teach you anything?

Didn't the royal family give you anything? For somebody who married royalty, Ferguson has been strangely socially immobile. She never quite looked the royal part, and now, if her extraordinary account of her finances is to be believed, she is living in a friend's house, off an income of £15,000 a year - a financial position that places her, according to the excellent report by the National Equality Panel in January this year, in the wealth category of an unemployed 16-to-24-year-old. Admittedly, the "friend" is the Duke of York, and her income some type of divorce payment rather than a benefits cheque, but in financial terms, the two are on a par. Except for that access.

The film is toe-curlingly awful, from the moment the duchess's eyes blink in excitement when $40,000 in cash is placed in front of her
to her admissions about her own financial circumstances - "I absolutely have not a pot to piss in" - and the naivety of the faux-businesslike conversation:

Sarah: And he [Andrew] says, "Let's play, we'll play" - as long as it's nothing to do with him . . . But you will be his friend. I will listen to the friendship talk between you two. And then I do it.
Reporter: OK.
Sarah: You two talk.
Reporter: Right.
Sarah: I listen.
Reporter: OK.
Sarah: Then I activate . . .

Starved out

This is not a monster, it's a child. And it's a child the royal family should have done more to protect. Instead, in 1996, they turfed her out with an income of £15,000 a year and permission to stay on in the matrimonial home. This is the mother of two children who are expected to be raised as princesses - just how did they expect her to do that on £15,000 a year? So the Duchess of York has been living off her children's trust funds: "My children pay for me." How humiliating, how awful. Presumably, now that the children have grown up, she doesn't officially have any entitlement to a safe place to live. Because Sarah Ferguson did what so many emotionally beaten-up, unequal, frightened wives do: she didn't play hard enough on the divorce.

Unlike Diana, who reportedly forced Prince Charles to sell his things and borrow from the Queen to meet her £17m divorce settlement, Sarah walked off with nothing because she wanted to remain on civil terms with the royal family. Well, not quite nothing: she walked off with two children she had to raise under the scrutiny of the world, amid the hostility of the media and most of the public, and with that royal tag hanging around her neck. Don't tell me she could have walked away from it; her children are fifth and sixth in line to the throne.

“I'm a complete aristocrat. Love that, don't you? I love it. It's tremendously fabulous." No, it's not, Sarah. It's awful. And they abused you. Even Andrew - especially Andrew, your "best friend" - left you with nothing, failing to ensure you gained even independence from "the firm". Lawyers call it "starving her out": the use by the man of unfair financial advantage at a time when a mother is under great stress, worrying about where her children will live, feeling her whole security and emotional worth under threat, and without a penny to her name, to get her to sign a divorce settlement that fails to leave her with adequate financial support.

He has the money, the connections, the expensive lawyers - she has the kids to look after and no stomach for a fight, nor the funds for good legal advice. How much worse would all those factors be if you were divorcing royalty, in the eye of a media storm, with two small heirs to the throne vulnerable in the middle? As she told the News of the World: "The Queen of England sent lawyers in to divorce me from Andrew . . ." Sarah was starved out.

Sting in the tale

So she has been left wheeling and dealing. Apart from the contract with Weight Watchers, there has been some PR, an introduction here or there, a word in the right ear - exactly, in other words, how business and politics operate, all the time. And the media, too, incidentally. Fleet Street is full of favours for access; bear that in mind when you consider the News of the World "sting". Whitehall hums with revolving doors through which the terribly talented offspring of journalists and political scions swap CVs and work experience.

Using family connections to gain financial advantage - whether it is £500,000 upfront or a lifetime of high salaries and good jobs - is different only in degree, not in kind. The pecuniary advantage might not be as immediate, but nobody would seriously deny that it exists.

Women who marry into the royal family have a tough time with money because they don't have anything in their own right, and when they try to earn it, there's always a problem. (Prime ministers' wives find themselves in a similar situation.) It's an appalling position for a modern woman to find herself in.

The Duchess of York is clearly profligate and could do with some financial training, but this was private money from some idiot businessman that she was playing with, and if such businessmen do exist, prepared to pay half a million quid to meet the Duke of York, should we care? I don't.

This article first appeared in the 31 May 2010 issue of the New Statesman, The war on the veil

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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.