Bush's bluff has been called by China

Even for George Bush, the apostle of climate-change deniers, an out-and-out obstructionist US positi

That climate change was top of the agenda at this year's G8 summit in Heiligendamm, Germany, is a measure of how far the issue has come to dominate the international stage. Three or more years ago, it only ever featured on the banners of protesters. What was marginal has become mainstream.

Even for George Bush, the apostle of climate-change deniers, an out-and-out obstructionist US position is no longer tenable. Rather than calling the science "uncertain", Bush realises he has been left isolated by a transformation of the US domestic political scene. He has had to resort to damage limitation, such as his agreement to "consider" US participation in a G8 initiative to cut global emissions by 50 per cent by 2050, announced at the summit on 7 June.

The climate-change rug has been pulled from under Bush's feet thanks largely to the efforts of three key people - all American. One is Al Gore, who has invested most of his political capital and new-found star status in pushing climate to the top of the US domestic agenda. Second is Greg Nickels, mayor of Seattle, who started a campaign in 2005 to get US mayors to unilaterally opt into Kyoto just as President Bush had unilaterally opted out. At the latest count, 527 mayors, representing over 66 million Americans, had signed up.

The third person was the biggest coup of all: Arnold Schwarzenegger, governor of California, who has pioneered state-level partnerships to address global warming by setting up the Western Regional Climate Action Initiative, which now includes Utah, Arizona, New Mexico, Oregon and Washington, as well as his own California. The psychological effect of Arnie's support should not be underestimated - not only is he a Republican, but he has made caring about the climate respectable among red-blooded, Hummer-driving American males. No one need worry about looking a bleeding-heart liberal if they have the Terminator on their side.

Bush is simply following these real leaders when he admits that the US will one day have to reduce its greenhouse gas emissions. This sends a crucial signal to American business that regulation is coming - perhaps in as little as two years - and that it needs to prepare for the inevitable. In such conditions even big polluters begin to cry out for political action which gives them a long-term framework for making investment decisions. Bush will be history by 2009, and it is now inconceivable that a new administration of either party could keep the US out of the next phase of Kyoto.

For years Bush has cited the Chinese as his main reason for opting out of Kyoto. The US argued that a greenhouse-gas commitment would make US goods less competitive than China's. Now the Chinese have called America's bluff.

On 4 June, Beijing released its climate change plan, which officially confirmed the country's indefinite refusal to countenance any future emissions targets. Instead, President Hu Jintao reminded the G8 of the UN principle of "common but differentiated responsibilities", where-by industrialised countries - which have both the highest historical responsibility for past emissions and the largest current per capita emissions - must take the lead. As Chinese officials stated, the country may be the world's second-largest emitter, but if every country had per-capita emissions as low as China's (about four tonnes of CO2 per person per year; the US's are 20) there would be no climate-change problem. Ominously, India's leadership is now lining up behind the Chinese position.

This stalemate will continue until Bush leaves office. Once a successor is in place, and the US has demonstrated a real commitment to taking on dramatic cuts - only then will China and India reconsider. In all likelihood, any future framework will take the form of "contraction and convergence".

All this brinkmanship will, of course, lose us still more valuable time. To keep global temperatures from crossing the dangerous 2°C line (EU policy) global emissions must peak within the next eight years. In other words, we need to stop talking about 2050 and start talking about 2015. The 2°C time bomb is ticking and we'll need a global emergency action plan to defuse it.

Mark Lynas has is an environmental activist and a climate change specialist. His books on the subject include High Tide: News from a warming world and Six Degree: Our future on a hotter planet.

This article first appeared in the 18 June 2007 issue of the New Statesman, New Britain - The country Brown inherits

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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.