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‘‘The party has lost its soul’’

After a 60-year-long association with Labour, the former MP Alice Mahon has resigned in protest agai

She was born into the Labour Party. Her  grandfather, a Scottish miner who moved to Yorkshire in search of work, told her how he had heard and been inspired by Keir Hardie. At the age of ten, she was delivering Labour party leaflets. At 19 she was a party member, and at 49, she became a Labour MP, for her home town of Halifax. Now, after 60 years’ association with the party, Alice Mahon has had enough.

Her resignation was announced the weekend of 18 April in a letter to her constituency chairman, in which she claimed that the party’s leadership had “betrayed many of the values and principles that inspired me as a teenager to join”. There have been many attacks on New Labour before, but Mahon’s could yet prove to be one of the most damaging.

Widely respected throughout the labour movement for her integrity and commitment to social justice, Mahon’s critique of New Labour has traction, as it chimes with what millions of core Labour supporters feel about the party’s lurch to the right. “Labour is the party of bankers, not workers,” she tells me. “The party has lost its soul, and what has replaced it is harsh, American-style politics.”

Like many on the left, she hoped that things would improve with Gordon Brown’s elevation to the leadership in 2007. “I was naive enough to think that when Tony Blair went we would get a change of direction. But it was just wishful thinking. The thing is that Brown really believes in neoliberalism. Things are getting worse in the party, not better, particularly since Peter Mandelson came back.

“Take the Welfare Reform Bill. John McDonnell was magnificent, but what I thought was deeply depressing was that – apart from Lynne Jones – there were hardly any Labour women MPs attending the debates and opposing the bill.”

The party’s “obsession” with privatisation, and the way former cabinet ministers (16 at the latest count) obtain private-sector jobs soon after leaving office, are particular bugbears. “Why are we continuing to privatise? It can’t be because privatised services work better; we only need to look at the railways to know that that isn’t true. One has to wonder whether it’s because of the rich pickings politicians can get when they leave office. They are joining companies which bid for government contracts, and there is a clear conflict of interest.”

Then there’s foreign policy. Mahon, a veteran peace campaigner, has opposed all of New Labour’s military interventions. “Labour has become the party of war. The wars against Yugoslavia, Afghanistan and Iraq are all part of the same imperialist war. The Labour Party was supposed to be against imperialism. I remember seeing children being pulled out of the rubble when Israel bombed Lebanon. But the government wouldn’t say anything to condemn it. What kind of morals is that?”

For Mahon, the party is now beyond repair. “New Labour’s control of the party is total. They don’t just use smear campaigns against the Tories, but against anyone within the party who opposes them. Take the case of Janet Oosthuysen, who was selected to be the prospective Labour candidate for Calder Valley at the next election. She’s a lovely woman and very popular with local people. So what did they do? They dragged up the fact that she had once scratched her former husband’s car, and the NEC then blocked her candidacy.

“Then there’s Bob Wareing [Labour MP for Liverpool West Derby from 1983 until he was deselected in 2007]. What happened to him was disgusting; a lifelong socialist who had given great service was deselected in favour of a thrusting, ambitious Blairite [Stephen Twigg] who had lost his seat in the last election.”

Mahon, as the descendant of a miner, feels she has nothing in common, either politically or personally, with New Labour’s middle-class metropolitans. “Blair was a cuckoo in the Labour nest. New Labour is nothing whatsoever to do with the Labour Party. What do I have in common with James Purnell? He looks like a Poor Law Guardian.”

So if the Labour Party is not the answer for progressives, what is?

“I’d advise people to vote for individual candidates. I’m not going to join any other party. What parties are there? The big disappointment has been the unions, who have continued to support Labour, even when they’ve been privatising and attacking working people.”

As honest and as straightforward as any politician I have met, Alice Mahon is a throwback, in the best sense of the word, to the times when the Labour Party inspired devotion in working-class communities around the country. “When I was a child growing up in Halifax, there were three main topics of conversation in our house: Rugby League, cricket – and the Labour Party,” she recalls. One wonders in how many working-class households today the Labour Party is discussed in affectionate terms. And how many ten-year-olds will be out ­delivering party leaflets.

New Labour may have won three general elections in a row, but by alienating those like Alice Mahon, who have given a lifetime of service to the party, it could well have sown the seeds of its own demise.

This article first appeared in the 27 April 2009 issue of the New Statesman, Rise of the Geek

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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.