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Liverpool, Room and Miliband Minor

Whether Ed wins or loses, he has, from a standing start, established a significant power base.

In the autumn of 2008, Vince Cable was the principal guest at one of our New Statesman Thursday lunches. Back then he was still the Gandalf of British politics: a benign sage, critic of the carelessness and excesses of the Blair-Brown boom years, the scourge of Tory neoliberal irresponsibility and a ubiquitous presence on television and radio. He was, in his own self-image, the Free Radical, as his memoir of 2009 was titled. To the rest of us, he was the nation's favourite "Vince".

This past week, when I interviewed him at a New Statesman fringe event at the Liberal Democrat conference in Liverpool, I asked him if nowadays he still felt quite as free and radical. I reminded him that in chemistry a free radical is something unstable, highly reactive and very dangerous - everything some Tories consider Cable to be. To them, he remains the enemy within, a lefty imposter at the cabinet table, the man most likely to mutiny.

“I'm a member of a party that has its principles and its policies and I'm bound by them," he told me. "In that sense, none of us who speak in the party's name are free - we have collective responsibility within our party. And I'm a member of a cabinet that also has collective responsibility."
He denied that he was operating at the very limits of collective responsibility, as has been suggested after he complained of how the government's rigid cap on non-EU migrants was adversely affecting prospects for growth.

Power Cable
Talking to Cable, I had no sense that he was miserable, as is often assumed. He gave every impression of being, like his leader Nick Clegg, committed to the coalition for the duration of the full, five-year parliamentary term. Power, you see, is thrilling - and at the age of 67 he is enjoying this unexpected late flourishing. Why walk away? Vince even described himself as an "enthusiastic deficit hawk", quite a turnaround from his pre-election position when, as a dedicated Keynesian, he warned repeatedly of the dangers of imposing austerity on a depressed economy. Now, he says: "I am a late convert [to George Osborne's position]."

But does the government have a plan B if the forward economic indicators continue to suggest that consumers are losing confidence and that the economy may yet tip back into recession? "There is a plan A," he said, to the delight of the assembled Lib Dem activists. "It would be very strange if the government said: this is our plan, we don't expect it to work, here's our plan B. That would be completely loony."

To translate: there's no alternative and there will be no turning back.

Quality of Mersey
On arriving in Liverpool, I booked a room at a hotel on Hope Street, which connects the city's two great cathedrals: a link road between faiths, a route across the old sectarian divide. The area in and around Hope Street, with its exceptionally fine restored Georgian terraces, has been revitalised, like so much of the city centre.

It can be difficult to explain to visitors who have never before been to Liverpool just how decayed the city centre was during the mass unemployment of the early 1980s, when so many of the once-grand public buildings, such as the neoclassical St George's Hall, opened in 1854 as both a concert hall and law courts, and outside which stands a statue of Disraeli, were sites of spectacular dereliction.

My room was on the fifth floor of the hotel, high up above the city below, and as the day's light faded you could see right across the rain-darkened streets to the waterside docks, declared a Unesco World Heritage site in 2004, and out across the sea from where the ships used to arrive when Liverpool was still the great imperial port city.

Room of her own
On the train home from Liverpool, I finished reading Emma Donoghue's profoundly affecting Booker shortlisted-novel, Room. It is narrated by an endearing five-year-old boy named Jack, who for his entire life has been incarcerated with his young mother in a cork-lined basement room that measures 11 feet by 11 feet.

The novel is an imaginative recasting of the tragic case of Elisabeth Fritzl and one of her children, the five-year-old Felix, in Austria. To Jack, the room is the whole of the world, all he has known and all he can ever know.

The set-up is horrific: a student in an unnamed American town is kidnapped, locked away in a suburban dungeon and then systematically raped by her captor. But the novel is in no way horrific; it is rather a joy to read: complicated, verbally inventive, often and unexpectedly humorous. "When we see a natural style," wrote Blaise Pascal, "we are astonished and charmed; for we expected to see an author, and we find a person." It feels something like this with Donoghue's novel.

Edward the contender
It's absurd, the way Ed Miliband has been caricatured, especially by the middle-aged, right-of-centre commentariat, as an unreconstructed early-1980s-style leftist: "Red Ed", the Bennite reactionary. Yet, the more I think about it the more I understand quite what an extraordinarily resilient and cunning campaign he has fought. His brother, David, was preparing to run for the leadership long before Labour lost the general election. He was recruiting staff, chairing strategy meetings, raising funds, and so on. In a sense, he has been running a continuous well-funded campaign ever since the late summer of 2008, when he first began to agitate against the floundering Brown premiership.

Meanwhile, Ed spent the early months of this year preparing the ill-fated 2010 manifesto while agonising over whether he dared to challenge his elder brother. There was no momentum to his leadership bid, and little planning.

That during this protracted campaign he has defined himself against David, tacking to the left, is entirely sensible - he's been trying to win the leadership of the Labour Party, for goodness' sake, a party that, because of the Iraq war and the economic crisis, had lost all sense of confidence, purpose and direction. Why seek to occupy the centre ground when his brother had already pitched his camp there?

Whether Ed wins or narrowly loses, he has, from a standing start, established a significant power base within the party, especially among the young and those new members who have been stirred to join since the election. Win or lose, he has national prominence and has succeeded in speaking a different kind of language - indeed, even attempts to remoralise our political discourse - from that used so ritualistically by the New Labour establishment in the years after the second landslide of 2001, and all the failures and hurt that flowed from there.

Jason Cowley is editor of the New Statesman
Peter Wilby returns next week

Jason Cowley is editor of the New Statesman. He has been the editor of Granta, a senior editor at the Observer and a staff writer at the Times.

This article first appeared in the 27 September 2010 issue of the New Statesman, The 50 people who matter

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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.