I have a problem with suspended coffees

The carbon credits of the coffee business are just a fad.

Suspended coffees are a recent phenomenon, atleast etymologically. Large hearted coffee house and restaurant patrons have been leaving behind 'suspended' meals and drinks for eons. The only difference being that now a spontaneous act of charity has been hijacked by the most pernicious of all tax avoiders in the UK.

Before we term this post as super-hipster balderdash, let's consider a few sobering truths. Starbucks played so truant with Her Majesty's Revenue and Customs (HMRC) that even Prime Minister David Cameron was forced to dish out a little cautionary word to the company. Cameron said that tax-avoiders "need to wake up and smell the coffee". How poetic.

You know you have over-stepped your tax-avoidance quota when the Tories lash out at you. Starbucks has certainly done that. It paid all of £8.6 million in corporation tax in its 14 years of trading in the UK.It sold £400 million worth of overpriced coffee, muffins and pretentious thingamajigs.

We all know the big bad wolf that devours independent coffee shops, we all know of the poorly paid baristas and the insufferable smug patrons who frequent the Starbucks of our world.

The Marketing Magazine calls Starbucks’ campaign as a way to improve its Corporate Social Responsibility credentials after last year’s tax evasion debacle. At the height of the tax scandal, Starbucks’ market share dropped significantly in the UK. Guardian reported in April this year that Starbucks’ market share had dropped by seven percent since last year. In the same period Costa Coffee's market share went up seven percent.

Suspended coffees are the planking of philanthropy. They are the carbon credits of the coffee business. They are a fad. And we have all fallen for them. We have been had.

By giving an act of kindness a name and a setting such as Starbucks cheapens the goodness. All of Tumblr, Facebook and Instagram are abuzz with posts about old weather-beaten homeless chaps in grimy jackets and week old stubbles supping on the cup of coffee. Cue boastful philanthropy.

Yes, it might do the odd down and out the good, and yes I might be seen as thrashing the very Piniata of all that is good in the world but what happened to good old altruistic do-gooding? What next; The Society for Getting Frail Old Ladies Across the Street? The I Sent a Penny to Poor Africans when I Bought a Bottle of Mineral Water Society?

It is not the act of goodness that rankles; it is reframing of it as a fad. Because fads don't last. Oh, and the very sanctimonious lot that think they are doing a world of good by leaving behind suspended coffees on the counters of Starbucks, Café Neros and of Costa Coffee are not only stuffing in money in the coffers of companies that avoid tax but are also giving them free publicity.

My problem is with how quickly we forgive and forget those that have played you and I. In its investor reports Starbucks reported massive profits and an expanding empire. Back in the UK it reported losses. Can we ever trust them?

Our dependence on coffee is clear to see. Any why not? One might as well substitute coffee for opium; De Quincey's’ Pleasures of Opium: “If taken in a proper manner it introduces the most exquisite order, legislation and harmony...communicates serenity and equipoise to all faculties, active or passive...the sort of vital warmth which is approved by the judgement.”  The humble coffee bean harvested, roasted and ground is worthy of a modern day paean of its own.

 It is by far the most perfect PR strategy ever. Nay, not a penny spent on it and you actually rake in money as the Che' crowd leave behind 'suspended' coffees.

Your coffee houses tended to be a place for the disgruntled hatching plots. They tended to be mutinous furnaces with the crackle of hot-blooded old and young. Today, they are boring monochrome monstrosities. The coffee is liquefied cardboard served in cardboard meant for a facsimile clientele.

Give me back the Italian espresso bars in Soho with their formica topped tables speckled with gum, where coffee was cheap and the caffeine content jarring, where failed actresses wore bootcut jeans with failing hems. Give me back my Pellici's and my Alfredo's. Give me back my messiness, my grubbiness, my coffee tinged darkness and dankness.

And never mind the suspended coffees.

Photograph: Getty Images

Ritwik Deo is currently working on his first novel, about an Indian butler in Britain.

Show Hide image

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.