We need a broad European defence force in the brave new world

John Lloyd rightly identifies the post-Kosovo logic for a separate European defence capability, but argues that this will require renewed growth in arms spending ("Prepare for a brave new world", 19 April). But more money is not the answer to Europe's pathetic military power. EU members already spend two-thirds as much as the United States on defence to deploy perhaps as little as a tenth of the useful capability.Throwing more money at European defence under current arrangements would be to pour good money after bad.

As each nation has taken its peace dividend, the front-line combat units have been markedly reduced. Yet each of these tiny capabilities still requires the full panoply of their own national headquarters, training empires, logistic support structures and operational planning centres. If European nations are to raise the effectiveness of their defence spending, they must be prepared to pool their capabilities and train, operate and support them at the European level. This cannot be achieved overnight, but a number of opportunities will arise within the next five years.

Five nations are procuring exactly the same front-line fighter aircraft. We could have an EU Eurofighter force of 400 with very effective modern weapon systems in place by 2005 if we start planning now. Such a supranational force is not unprecedented. Nato operates its Airborne Early Warning aircraft in just this way. Seven countries are currently seeking to procure a common military transport aircraft. The UK has put aside money for two new aircraft carriers. An EU force of five carriers, with associated support ships, would be far more effective. By starting now with a number of such European force elements, we could build on the experience to develop over, say, 15 years a broad European capability which would match that of the United States.

Tim Garden & John Roper
London SW1

What George Orwell would have thought about the Balkan war (Letters, 9 and 19 April) is probably the least important matter for our consideration. However, I seem to remember him saying the choice between communists and fascists in prewar Germany was like "the choice between rats and rat poison". I think the choice may be even clearer now.

The only long-term solution for Kosovo is an international protectorate: the alternatives are the success of the pogrom against the Kosovars or the complete loss of any rights for Serbs in Kosovo when the majority population eventually returns. Achieving this will require the armed force of an outside third party, which is likely to include Nato. Why can't the appeasing New Statesman realise that sometimes you have to choose the least bad of evils and urge us to reach for the rat poison?

Robert Davis
London NW10

From time to time I have had a run-in with John Pilger. I think he was the first person to draw from me the admission that I "prefer animals to people". Today I am writing to congratulate you on carrying, he on composing, a brilliant piece on US military expansionism and the conformist timidity of the British media (19 April).

If neither the political left nor self-styled "investigative" reporters will intrude on what is going on, what hope is left?

The only exceptions are a few back-bench MPs like Tony Benn, Tam Dalyell and myself, who are heckled and shouted down (just as our predecessors were in 1938) by our parliamentary colleagues.

The Rt Hon Alan Clark MP
House of Commons, London SW1

This article first appeared in the 26 April 1999 issue of the New Statesman, The great Balkan lie

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.