Dancing with the Stasi

In the 2003 book Stasiland, Anna Funder documents what life was like for millions of people in East Germany, the inaptly named German Democratic Republic, before the fall of the Berlin Wall. She describes how the Stasi kept control – by recruiting half a million people to spy on their neighbours or members of their own families, tapping phones and generating files on their fellow citizens that, laid upright end to end, would have formed a line 180 kilometres long.

Political dissidents were jailed. Those who attempted to leave were arrested or even shot as they crossed the border. East Germans voted by approving the only name on the ballot paper or by putting a line through it. Those who chose not to support the approved candidate – the ballot was not secret – could lose their job or be expelled from university and would come under close surveillance from the Stasi.

You might think that, whatever arguments and differences British politicians have with each other, we can all agree that nobody wants to change our open, democratic society into anything like the East Germany of that era. We have our arguments in public, we campaign for support, we win or we lose and we argue again.

Yet, in describing Ed Miliband’s superb speech to the Labour party conference, David Cameron was quoted in the Sun as having said: “He might believe in one nation but I thought it sounded more like East Germany than Great Britain.”

The Prime Minister might think this is funny. It’s unlikely he thinks it is clever. He surely doesn’t believe it. If he does, he needs to explain himself.

Ed’s not red

Here are some of the things that Miliband called for: better vocational education and more apprenticeships; a proper split between high street and casino banking; making it easier for businesses to plan for the long term; an end to rip-off pension charges. I don’t know why those things sound like East Germany to Cameron. They don’t sound like East Germany to me. A divided Germany is not the most obvious model for a onenation politician.

The last thing we need in this country is to import the worst elements of US Tea Party politics into our own. It’s dishonest, it’s fatuous and it debases our politics. We don’t need to start comparing our opponents to regimes that in reality epitomise worse evils than anything we see in Britain today, either on the mainstream left or on the mainstream right. We don’t want a politics in which offensive caricatures take the place of arguments or in which a genuine issue of conscience such as abortion becomes a party-political dividing line.

I’m sending Cameron a copy of Stasiland. I hope he reads it. Then I hope he will realise that he made a bad mistake in stooping so low as to invoke one of the most despicable regimes of the 20th century in describing a contemporary, mainstream British political party. I hope the Prime Minister will reflect on what he said and take it back.

Tristram Hunt is the MP for Stoke-on-Trent Central (Labour).

This article first appeared in the 15 October 2012 issue of the New Statesman, India special

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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.