Christopher Gasson mocks the voodoo economics of the modern book trade

The one good thing about the disappearance of small independent publishers in the face of the expansion of large international media corporations is that having your book rejected is a much less painful process. Thirty years ago you would have had to send your manuscript to 30 or 40 different publishers before you could be sure that it was more or less unpublishable. Authors could paper their bathrooms with rejection slips and wallow in the misery of it. In 1998, thanks to the recent round of publishing mergers, you need only send out 12 copies of your manuscript before being sure that you have a less than 2 per cent chance of appearing in print.

The best illustration of the disappearance of choice for authors is the Bertelsmann group, which now controls Chatto & Windus, Bodley Head, Jonathan Cape, Hutchinson, Century, Methuen, William Heinemann and Corgi. These were all independent companies in 1968.

When you sent your manuscript out 30 years ago the owner-publisher, who had the ultimate say on whether you would be published, usually had impeccable literary credentials. A source of comfort, perhaps, for a disappointed writer. Nowadays, the owners of a publishing house are most likely to be international financial institutions, plutocratic German families or worse. Of the six largest literary publishers, two are traded directly or indirectly on the London stock exchange, two are German owned, one is US owned, one Australian owned, and one is the subsidiary of a French arms manufacturer. Even the few remaining small publishers have some pretty dubious backers.

As an author one can draw strength from being rejected by such people. Being unrecognised by philistines has been a mark of literary greatness since Jane Austen's Pride and Prejudice was turned down by Mssrs Cadell in 1797.

The final reason why being rejected by publishers has become so painless is that most of the big groups do not actually read unsolicited manuscripts. Others, for fear of appearing unfriendly to authors, do it more discreetly, sending manuscripts back with cryptic notes of non-commitment: market conditions are not right, or something like that. The slush pile is a very frightening thing for today's publishers. This is not because it is uneconomic to pay someone to slog their way through it, but because the material has not been pre-selected.

In a corporate environment books cannot be published on the whim of one person. They must be fought for; and it's much easier fighting for a book when it comes with a powerful recommendation from someone outside the publishing house. That person is likely to be a literary agent, and the strongest possible recommendation that a literary agent can give a book is that nine other publishers are fighting for the right to publish it. As a result, most publishers would feel more confident about paying an agent £30,000 for a book than they would picking it up off the slush pile for free.

That the gates of the publishing world are now controlled by literary agents should provide further relief for rejected authors. Agents make their judgement of a manuscript on the basis of whether they think they can win a good advance for it. Books which are written by celebrities or journalists in a position to promote their own work, those which have some topical angle or those which are similar to recent best-sellers such as Bridget Jones's Diary or Longitude have the best chance of success. So-called "sleepers" written by unknowns who may take several books to build up a readership are less of an attractive proposition unless they come with a strong personal recommendation. As a result, getting published these days often says more about your networking skills than it does about your ability as a writer.

This may be comforting for rejected authors, but it is not so encouraging for readers, especially as the chorus of critics and prize judges who complain about the baleful standard of many contemporary books grows ever louder. One may blame the German plutocrats, City pension funds and French arms manufacturers who displaced the independent publishing houses which used to bristle with eccentricity in the Bedford Square area of London but, in fact, their determined pursuit of profit offers the best hope for those who feel the industry is in terminal decline.

To be profitable in publishing you must spot potential where no one else can. The undiscovered talent who is snapped up for a song, whose sales then build over the duration of copyright to sell hundreds of thousands of copies, is what most excites institutional shareholders about publishing. Self-congratulatory literary cliques who ignore emerging talent are not very attractive, not even to French arms manufacturers or plutocratic Germans. Which means that there will come a time when the owners of the large conglomerate publishing houses will ensure that five or perhaps four rejection letters is all it takes to make an author feel utterly miserable.

This article first appeared in the 04 December 1998 issue of the New Statesman, Just get out and have fun!

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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.