London Olympics: How have the last seven years treated Newham?

The borough of Newham has yet to see that many gains from hosting the Olympics.

The Olympics were sold, both in the bid to the IOC and in the promise to Britons and Londoners, as games of regeneration. This may have been over-ambitious from the start; Olympics which turn a profit are rare. For every Atlanta 1996 or LA 1984, games which turned a slim and not-so-slim profit, respectively, with the help of massive commercialisation, there are ones like the 1974 Montreal games, which left the city in debt to the tune of CA$1bn and took 20 years to pay off.

Nonetheless, in 2005, in that day of euphoria between winning the games on the sixth and the London bombs bringing the city crashing down to earth on the seventh, Jack Straw told the House of Commons that:

The games will transform one of the poorest and most deprived areas of London. They will create thousands of new jobs and homes. They will offer new opportunities for business in the immediate area and throughout London.

A new study, performed jointly between Elizabeth Finn Care and the LSE, aims to see whether the 2012 Games will live up to the lofty promises made about them. The research looks at the borough of Newham, within which much of the Olympic park, and the stadium itself, is situated, and although the full results won't be available until August 2013, preliminary results have been made available already.

Straw's focus on jobs and homes isn't reflected quite so well on the ground. Despite the megaproject being constructed on its doorstep, as well as the opening of Westfield Stratford City, the largest inner-city shopping centre in Western Europe, Newham was hit harder than the rest of London by the recession. Unemployment increased by 44 per cent in the borough, from an already-high base of 13.7 per cent; the city as a whole started from 8.8 per cent unemployment, which then increased by just over a fifth.

Employment may be down amongst residents, but employers are up; the borough saw an increase of 6 per cent in the number of enterprises over the period of 2008 to 2011, even while England was seeing a 4 per cent decrease.

When it comes to homes, there has been an ongoing decrease in council housing stock since 2005, from 22,992 down to 17,547 by 2012, and that offset by the increase in housing association stock, which rose by just over 2,200 to 13,065 homes. That situation at least is expected to improve markedly after the Olympics are through, when the Athlete's Village is converted 3,000 more local flats.

While more jobs and more homes are unabiguously good, there are other measures which resist an easy value judgement. Private rents in Newham remain much lower than the London average, and particularly low when compared to other Olympic boroughs. The mean monthly rent for a two bedroom property in the borough is £833, compared to £1196 in neighboring Tower Hamlets; but for the residents of Newham that news is obviously something to celebrate, even though it is assuredly an indicator of the borough's continuing poverty. Similarly, the increase in house prices in the borough has been a tenth of that London-wide; the average house is worth 3.5 per cent more than it was in 2005, but across the capital that figure is 32.5 per cent. Again, a mark of the continued problems the borough is having, but also a sign that, unlike many boroughs in the city, the children of Newham stand a chance of being able to live in the area they grew up in.

The lead researcher, LSE's Professor Anne Power CBE, agrees, saying:

We should be glad there are parts of London where prices are still modest... what we're trying to do [in improving the quality of life in Newham] is not displace people.

It is very easy to identify a borough with an geographical area – that is, after all, what they are – but improving Newham must mean more than just building homes for wealthier people to move into. The real test of the success of the Olympics will be if the people in Newham in 2005  are still there in 2013, and better off for it.

The Olympic stadium and the Orbit thing. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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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.