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Leader: Now is not the time to give up on a two-state solution

A one-state solution would be even more fraught with difficulty.

The window of opportunity for a “two-state solution” to the Israeli-Palestinian conflict has long been narrowing. Should the Israeli prime minister, Binyamin Netanyahu, endorse the conclusions of the Levy report, he could close it for good. The report, produced by a government-appointed panel led by the former Supreme Court justice Edmund Levy, argues that Israel’s presence on the West Bank does not constitute an occupation and, therefore, that the 121 Jewish settlements in the region are legal under international law. The acceptance of the report by the Likud-led government would formalise the de facto annexation of the West Bank and make the creation of a viable Palestinian state impossible. Israel would then be forced either to grant full citizenship to its Arab population or, in the words of its former premier Ehud Olmert, “face a South African-style struggle for equal voting rights”.

Speaking in 2007, Mr Olmert presciently added: “The Jewish organisations, which were our power base in America, will be the first to come out against us because they will say they cannot support a state that does not support democracy and equal voting rights for all its residents.”

Many Jewish Americans, 78 per cent of whom voted for Barack Obama in 2008, are struggling to reconcile their historic support for Israel with their dismay at its disregard for liberal norms. In response to the Levy report, 40 Jewish Americans associated with the Israel Policy Forum, a centrist body founded in 1993 with the support of the then Israeli prime minister, Yitzhak Rabin, wrote to Mr Netanyahu warning him that, if endorsed, the report will “add fuel to those who seek to delegitimise Israel’s right to exist”.

Even if, as seems probable, Mr Netanyahu rejects the commission’s findings, the two-state solution remains imperilled. In defiance of the UN, the US and the EU, the Likud-led government has continued to expand Israeli settlements in the West Bank and East Jerusalem to the point where there are now more than 550,000 settlers there, controlling 42 per cent of the land and representing nearly 10 per cent of the Israeli Jewish population. With every new settlement that is constructed, the possibility of a viable and contiguous Palestinian state recedes further. It is in this context that an increasing number of figures on both sides have abandoned the principle of “two states for two peoples” in favour of that of one binational, secular state. In his review on page 40 of Peter Beinart’s book The Crisis of Zionism, which charts the former New Republic editor’s progressive disenchantment with Israel, Geoffrey Wheatcroft writes: “The settler and Palestinian populations are now so mixed up that a rational and fair partition is practically impossible.” In addition, as the Palestinian-American author Ali Abunimah points out on page 25, a recent poll found that 36 per cent of Israelis and 31 per cent of Palestinians support “one state for two people in which Arabs and Jews enjoy equality”.

Yet while the proposal of a one-state solution has consid­erable rhetorical appeal, it is no less fraught with difficulty. To suppose that Israelis and the Palestinians could live side by side in one state is to indulge in liberal utopianism. As Jonathan Freedland writes on page 22, “It suggests that two nations that could not negotiate a divorce should get married instead.” Most Israelis and Palestinians will continue to support a two-state solution as the means for both sides to preserve the right to national self-determination. There is no mandate for a one-state solution, whether it be a “greater Israel” or a binational state.

At least rhetorically, Mr Netanyahu has accepted as much. In 2009, he declared that he was willing to see the establishment of a Palestinian state, albeit one barred from having an army and controlling its airspace. Two factors in particular mean that he must now live up to his word. The first is what Mr Netanyahu once called “the demographic threat”: the likelihood that the number of Arabs in Israel and the occupied territories will exceed the number of Jews in the next two decades. Should this landmark be reached with a Palestinian state still unestablished, Israel’s discrimination against its Arab population will be the subject of even greater outrage. The second is the Arab spring and the potential for it to undercut Israel’s status as a bulwark of multiparty democracy in the region.

If Israel is to achieve the two-state solution that its ultimate security depends on, the expansionist settlement programme must be reversed and Mr Netanyahu must negotiate with the Palestinians – who have not been well served by their own leaders over many years – in something approaching good faith.

This article first appeared in the 23 July 2012 issue of the New Statesman, Israel: the future

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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.