Khao Lak fails the test

Observations on Thailand

The phone call came at 7pm, just after I'd clambered into a bath. "Sir, there's been an earthquake in Sumatra: 8.2," crackled through the handset. At first I wasn't clear why I'd been called about tectonic plate movements a thousand miles away. Then the penny dropped. I was on my honeymoon on the west coast Thai beach resort of Khao Lak, with its glass-clear seas and white sand beaches.

Khao Lak took the brunt of the Asian tsunami that hit Thailand in 2004. More than 4,000 tourists and locals, half of Thailand's total loss, perished on its beaches from the aftershock of a large Sumatran tremor. "How long do we have?" I asked. "If it's there, it will be with you by 9pm. Check the BBC on your TV, sir." Click, brrrr.

It has been a long haul getting Khao Lak back on its feet. The 11-metre wave destroyed every beachfront resort, decimating the local economy. A police boat, which was patrolling the waters at the time of the tsunami, still sits marooned three kilometres into the jungle as a monument to the sea's power. The death toll stole the headlines, but the survivors suffered enormously. A 2006 Rutgers University study into the effects of the tsunami noted that tourism made up 6 per cent of Thailand's GDP. That figure rose to nearly 50 per cent for Phang Nga, the province that includes Khao Lak, which had 642, 387 visitors in 2004; in 2005, that figure dropped to almost zero.

"It was very hard," explains Ria Netboot, a Dane who with her Thai husband runs the Viking Steak House on the high street. "We were lucky; the buildings along this street are higher, so we survived."

To reassure locals and potential tourists, the Thai government invested in an early-warning system monitored by the National Disaster Warning Centre north of Bangkok. Two hi-tech sea buoys were placed in the Andaman Sea to monitor sea levels; 30-metre high warning towers - able to raise the alarm in five different languages - were installed along Thailand's west coast beaches. If there was a sniff of anything, evacuations to special shelters in the mountains would begin within minutes.

We rushed to dress, grabbed our passports and joined the chaotic exodus. Hysterical families were running, cycling or driving to the mountains. Then the heavens opened. My wife had a brainwave. "Head for the Viking Steak House. If they survived the last one, they'll survive this one." We drove on our clapped-out moped past crashed motorcycles and trees blown down by the hurricane's gusts. Others had had the same idea and the Viking Steak House was full of soaked tourists, crying Thai families and bemused diners.

The Thai government, and in particular the National Disaster Warning Centre, was nowhere to be seen or heard. The 30-metre beacons stayed silent; no warnings were issued. Survivors from the previous tsunami turned to international news networks.

"I didn't hear any warning so I stayed on the main street here," explained Toom, a Thai who runs an internet cafe . "Everyone else has run up the mountain; there's about 500 people up there."

That Thailand's expensive warning centre failed its first test provoked outrage in the local media. Early tsunami warnings were issued in every country except Thailand - another blow to a government trying to engender trust among its sceptical population. Faith in authority, bar the revered king, is at rock bottom.

Any recovery made by the beleaguered tourist industry will have been further destroyed by this month's horrific plane crash at Phuket airport, which killed at least 89 people.

At the Viking Steak House, 9pm came and we were all still alive. Ria moved from table to table breaking the news: "We've been given the all-clear; there's no tsunami!"

Had the government managed to send word at last? "No," answered Ria. "I heard it on the BBC."

This article first appeared in the 24 September 2007 issue of the New Statesman, Trouble ahead: the crises facing Gordon Brown

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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.