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Leader: Land reform remains one of the great progressive causes

The government needs to be much more rigorous about taxing wealth and static assets.

The coalition government has listened to those who were opposed to its new planning guidelines for England and has amended them in a way that should appease many of those who were fearful that the bulldozers were poised to rip up swaths of our loveliest countryside. Among those opposed to the draft proposals were the National Trust, the Campaign to Protect Rural England and the Daily Telegraph, which ran the "Hands off our land" campaign.

The New Statesman supports the government in its attempt to reform our planning laws and to confirm the "primacy" of development. This country has a desperate shortage of housing, especially so-called affordable housing, and it is correct that we seek to build on existing "brownfield" sites in towns and villages as well as create new towns, as happened after the Second World War. It is correct, too, that the government has recognised the "intrinsic" beauty of the English countryside - that, in effect, it is an end in itself, not a means to an end - and that there should be a "presumption in favour of sustainable development", whatever that means. (No doubt the lawyers will be busy disputing the matter.)

So far, so good. However, the larger problem, unacknowledged by the government and indeed the Labour Party, is the profoundly uneven distribution of land ownership in Britain. It is often assumed that England in particular is already overdeveloped and that very soon our green and pleasant land will be covered in concrete.

That is nonsense. Only 10 per cent of England (and 6 per cent of Britain) is developed. The myth spun about Britain is that land is scarce. It is not - landowners are paid to keep it off the market through a system of agricultural subsidy. What Britain suffers from, especially in the south-east of England, is a shortage of land on which housing can be built. As a result, the urban plot becomes ever more congested, land values and property prices continue to rise - because scarcity of land attracts a premium value - and our young people, many of them debt-burdened from their university years or struggling to find work, cannot afford to buy their first home.

The UK is 60 million acres in size, of which 41 million are designated "agricultural" land, 15 million are "natural wast­age" (forests, rivers, mountains and so on) and owned by institutions such as the Forestry Commission and the Ministry of Defence, and four million are the "urban plot", the densely congested land on which most of the 62 million people of these islands live. In sum, 69 per cent of the acreage of Britain is owned by 0.6 per cent of the population. More pertinently, 158,000 families own 41 million acres of land, while 24 million families live on the four million acres of the urban plot.

The wealthiest landowner is the Duke of Westminster, who through luck and a quirk of ancestral good fortune owns hundreds of acres of prime real estate and land in Belgravia and Mayfair. He relentlessly exploits his good fortune.

Worse still is that the owners of as much as 30 per cent of the land of England and Wales are, in effect, unknown, because there is no legal obligation to register the ownership of land; Her Majesty's Land Registry has not carried out a cadastral survey of Britain. These "unregistered" owners also receive annual subsidies on their "agricultural" acres.

The government needs to be much more rigorous about taxing wealth and static assets, especially property and land, to challenge the extreme concentration of wealth in Britain. It is right that more land is developed and more houses built; but true and lasting land reform remains one of the great potential progressive causes.

This article first appeared in the 02 April 2012 issue of the New Statesman, France is my enemy

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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.