Another three years to wait for 0.7% overseas aid?

The Tories have again delayed their pledge to meet the UN aid spending target.

The Observer yesterday reported that the Department for International Development (DFID) have pushed back their commitment to spend 0.7% of gross national income (GNI) on overseas aid from 2013 to 2015. The report is based on the new update to DFID’s business plan which now lists the end date for both the commitment to legislate and also the commitment to meet the UN spending target as "Mar 2015".

I’ve written for The Staggers several times about the government’s slow back-track on this commitment, here, here and here. The commitment is clear. The coalition agreement, says on page 22:

We will honour our commitment to spend 0.7% of GNI on overseas aid from 2013, and enshrine this commitment in law.

But, on page 117 of the Conservative manifesto, the commitment, and the timing of it, was more explicit:

Will be fully committed to achieving, by 2013, the UN target of spending 0.7% of national income as aid. We will stick to the rules laid down by the OECD about what spending counts as aid. We will legislate in the first session of a new Parliament to lock in this level of spending for every year from 2013.

The Observer suggests that Labour will try to force the government’s hand by using a private member's bill from a Labour member of the development select committee. Previously, the International Development Secretary, Andrew Mitchell, told Channel 4 News that the bill is ready and that "the law will come… but it must take its place in the queue."

Previously, I speculated that the go-slow was simply to avoid the optics of a backbench Tory rebellion. But the change to DFID’s business plan suggests that the legislative delay is necessary because the policy itself is to be delayed. This move might be popular with the public at a time when public finances are under pressure, but it would represent a breach of trust and would break the manifesto commitments of both governing parties.

Next week, IPPR and the ODI are publishing a report on UK public attitudes towards international aid and development as a contribution to the next phase of UK campaigning on poverty reduction and global development. Broken promises from the government risk returning the political and public debate on development to an unproductive political competition about spending, at the expense of the conversation that the public want to hear about results, change and progress in the developing world.

The last time they were in office, the Conservatives halved the aid budget. Labour trebled it. One reason the Conservatives made the promise was to achieve all-party consensus and put the issue beyond doubt. A broken promise on 0.7% would significantly damage the UK’s international position as a leading advocate for development and poverty reduction.

Next week sees the eagerly awaited publication of the ONE campaign’s DATA report that assess the record of rich countries against the promises they have made to the world’s poorest. The UK’s ability to pressure other donors to keep their promises will be seriously compromised if the Government reneges on its own commitment.

If David Cameron is going to show global leadership as the co-chair of the panel creating the next set of international development goals, he needs to start by showing leadership in his own Parliament and seeing off the opposition in his own party. Labour’s private member's bill may force his hand but a true global leader doesn’t whip from behind, they lead from the front.

Update: DFID have been in touch and say: "The position has not changed. The Bill is ready and will be introduced when Parliamentary time allows. The Business Plan has been updated to reflect the final date by which the Bill can be made law within this Parliament.”

Richard Darlington was Special Adviser at DFID 2009-2010 and is now Head of News at IPPR - follow him on twitter: @RDarlo

International Development Secretary Andrew Mitchell looks at a refugee at the Dagahaley refugee camp in Dadaab, near the Kenya-Somalia border. Photograph: Getty Images.

Richard Darlington is Head of News at IPPR. Follow him on Twitter @RDarlo.

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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.