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Blow, blow, thou swift wind

We need to make all the hot air work for us.

Given that it’s party conference season, it seems appropriate to talk about hot air. It turns out that there’s plenty to go round. Thanks to the sun’s heating effects on the atmosphere, the circulation of air is an enormous energy resource.

According to a study published on 9 September, there is enough wind energy available to meet our current energy needs 20 times over. The last line of the paper, published in Nature Climate Change, declares that “the future of wind energy will be determined by economic, political and technical constraints, rather than global geophysical limits”.

Clearly, we are already jumping the technical hurdles. The UK’s wind energy infrastructure, for instance, is reaching critical mass. Just before 10am on the morning of Friday 14 September, British windfarms achieved a new record high in their power output, supplying just under 11 per cent of the electricity in the National Grid, enough to heat and light more than three million British homes. The difficult bit now will be to keep going and to make sure Britain secures its share of the profits of this booming industry – which brings us to the economic constraints.

On 19 September, the new Ormonde offshore windfarm was opened, ten kilometres out into the Irish Sea from Barrowin- Furness. The Swedish owner, Vattenfall, took the opportunity to criticise the lack of incentives for companies to manufacture wind turbines in Britain.

The UK is committed to expanding our wind power capacity but it seems a precarious pledge, with the money and jobs flowing out of the country. These are not small figures, either. There are thousands of jobs at stake and the Ormonde windfarm cost £500m to create.

Across the Atlantic, some are predicting a recession for the wind     power industry because of similar lack of commitment. US turbine manufacturers have had a high old time, receiving $14bn in investment last year and creating 75,000 jobs. But a stimulus known as the production tax credit has been vital and it is due to expire at the end of the year. Mitt Romney has stated that, if elected, he will make sure the credit disappears.

A recent study released by the Natural Resources Defence Council shows how short-sighted this would be. Windfarms are an economic asset that can regenerate communities. A decade of community-owned wind-farming in Sherman County, Oregon, has stimulated a 300 per cent increase in per capita income. A fifth of the farms’ revenue is injected into the school system, making it one of the few counties where education funding is not being cut. That’s not to mention the $10m tax revenue going to the government.

Air raiser

There are similar communityowned wind power schemes in the UK, where, thanks to currents that drive huge masses of air west from the Canadian Arctic, we have more than our fair share of wind.

Scotland has the highest average wind speeds in Europe, which is why Alex Salmond plans to do everything he can to harness this energy as part of Scotland’s effort to generate all its electricity from renewable sources.

So now we have arrived at the political hurdle. Salmond has already had a fight with George Osborne over subsidies and he will continue to face barmy opposition, such as Donald Trump’s shameful sponsoring of billboard posters depicting broken, rusting turbines under the line “Welcome to Scotland”.

The Advertising Standards Authority has just smacked Trump down for the stunt (the picture was taken in Hawaii). One hopes that Westminster will show similar common sense and make every effort to ensure all that hot air works for us.

Michael Brooks’s “The Secret Anarchy of Science” is published by Profile Books (£8.99).

Michael Brooks holds a PhD in quantum physics. He writes a weekly science column for the New Statesman, and his most recent book is At the Edge of Uncertainty: 11 Discoveries Taking Science by Surprise.

This article first appeared in the 01 October 2012 issue of the New Statesman, Labour conference 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.