In this week's New Statesman: Europe's most dangerous leader

Plus a special report: can we afford foreign aid?

Can we afford foreign aid?

At the centre of the New Statesman’s aid package this week, the economist Dambisa Moyo, and the Liberal Democrat peer Paddy Ashdown debate the fundamental question: does aid work?

Moyo argues that much international aid to Africa has been ineffective in “combating poverty and spurring economic growth in a sustained way” because the majority is given without effective conditions attached – and that aid can negatively impact on an economy.

Moreover, foreign aid leads governments to spend more time “courting and catering to their donors than on their constituents”. Moyo questions why the world continues with its aid-based approach in Africa “when we know that trade, investment (domestic and foreign) as well as transparent and effective capital markets are essential for economic success”: 

There is a sense in which there is one set of policies designed for Africa, and another for the rest of the world.

Ashdown, meanwhile, argues that providing long-term aid is a practical as well as moral thing for the UK to do: 

The right type of development aid not only helps countries grow and gives children a better future but is also hugely important in helping to prevent great humanitarian crises. In the future, poverty and lack of access to resources will be two of the greatest drivers of conflict. Aid, which lifts countries out of hopelessness and poverty, is one of the best ways to prevent these conflicts. If you think aid is expensive, try war as an alternative. 

Also in the aid package, Imran Khan tells Mehdi Hasan that in Pakistan, “aid finances a lavish lifestyle” for politicians. Asked what damage international aid has done to the country, the chairman of the Movement for Justice party responds:

First, it stops us making the reforms to restructure our economy. If you have a fiscal deficit, you will be forced to cut your expenditure and you will do everything to raise your revenues. This important development did not take place, because of aid. Second, IMF loans. These two things have propped up crooked governments who have used the poor to service the debt through indirect taxation. The poor subsidise the rich in Pakistan. 

Elsewhere, the NS asks a number of campaigners and opinion-formers – from Jock Stirrup to Annie Lennox – a simple question: can aid end aid?

Tony Blair, who founded the Africa Governance Initiative, responds:

I believe in aid. That’s why, as prime minister, I negotiated the doubling of aid to Africa at the Gleneagles Summit in 2005 . . . But aid alone is not enough. Ultimately, development depends on two things: governance and growth . . . For our part, the rich world has to open up its markets and ensure that global trade rules are fair . . . [T]he of dependence on aid can be achieved within a generation.

Mo Farah, the British athlete and founder of the Mo Farah Foundation, argues “aid is vital in times of emergency – when famine struck Somalia last year UK aid kept people alive.” However, Farah points out: 

Drought is inevitable but famine is not, if we invest in the right solutions such as water wells, crop storage and support for farmers . . . We should be proud of our aid: it saves lives. And when the day comes when aid is no longer needed, we should be proud of that, too.

And in the NS interview, the model and charity ambassador Erin O’Connor tells Alice Gribbin how she thinks she can help Save the Children in their work with those suffering from preventable diseases in India:

“It’s about awareness. I’ve existed in 2D form for the past 15 years as a fashion model, but if that engages people who may recognise me here in the UK, that’s got to help in some way.”

Andrew Mitchell: “Midterm has arrived with a vengeance”

In the Politics interview, Rafael Behr discusses foreign spending in the age of recession with Andrew Mitchell, the Secretary of State for International Development. Mitchell rebuts criticisms aimed at the Tories that their commitment to aid is part of attempts to “decontaminate” the party brand. “It’s really insulting to say this is just about detoxifying the Conservative Party,” he tells Behr.

Mitchell also refutes complaints by some in the party that other “modernising” fixations – such as gay marriage – distract from the mainstream Conservative agenda. However, as Behr notes, the issue is a cause of grief for Tory MPs at the grass-roots level: some complain that gay marriage cost them seats in the May local elections. Mitchell instead blames economic uncertainty and the normal political cycle for the government’s difficulties, telling Behr:

“Midterm has arrived with a vengeance. It took a long time. Many of us couldn’t really understand why it was taking so long; it was like pulling a brick on an elastic.”

As an aside, Behr spots a telling piece of iconography in the cabinet minister’s office:

I notice, among the exotic souvenirs on a coffee table in the corner, a nutcracker that doubles as a Margaret Thatcher action figure.

Elsewhere in the New Statesman

  • John Burnside, the poet, novelist and NS nature columnist contributes a new short story, “Perfect and private things”, written exclusively for the New Statesman
  • Mehdi Hasan argues Angela Merkel’s mania for austerity is destroying Europe
  • Rachel Shabi reports on the need to question the accepted narrative on Syria
  • Conor Mark Jameson investigates what is causing the strange disappearance of our songbirds
  • Rafael Behr reveals Labour’s divisions over House of Lords reform
  • In Critics: Julia Copus explores the role of time in art and litearture; Toby Litt reviews the new book on Blondie, Parallel Lives; Alec MacGillis considers David Maraniss's biography of the young Barack Obama and Will Self's Madness of Crowds


Alice Gribbin is a Teaching-Writing Fellow at the Iowa Writers' Workshop. She was formerly the editorial assistant at 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.