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Election bribes

Ian Grey urges people to read the fine print when Greeks politicians come bearing gifts

Through a remarkable coincidence of timing, families are being encouraged to save lots of money on childcare courtesy of that benevolent Labour Government of ours, launched and promoted during the General Election.

Within the Grey household, we are fortuitous enough to have both a private and a public sector employer providing our household income stream and both of them have decided to jump on the employee benefits bandwagon of offering childcare vouchers.

The way it works is that an employee agrees to take some of their salary as vouchers (to a maximum of £2,600 a year, i.e. £50/week) and this sum is free of Tax and NI. (The incentive to the employer is that it is free of Employer NI as well). The vouchers can be paper or electronic, they are given or allocated to the carer who redeems them without penalty to the parent and everyone is happy. Or are they?

Well, I am not. I have read the forms and there seem to be some ambiguities in the process, which is somewhat convoluted. What happens if I want residual money back because I do not need childcare any more? Not covered. What if I want to pay some on one and some on the other? In theory yes, but the forms I have will not cope with this scheme properly. What happens when the third party scheme management Company makes a pig’s ear of the payments to my son’s nursery (and they will, think every other Government IT project managed by third parties)?

What is even more interesting are the online calculators provided by the service providers, the two of which I have looked at being SodexhoPass and Accor.

Supposedly, the scheme is simple. To quote Accor,

You will save £816 per year if you elect to take £50 per week with paper or electronic Childcare Vouchers and are a standard rate taxpayer. If you are a higher rate taxpayer you will save ££1,066 per year

Sounds good, yes?

However… …if you input random salary figures (assuming contracted out to get these results) then £20,000 salary and £50,000 salary do indeed give these figures (with maximum £2,600/year vouchers). But, if you input figures in the £32-37,000 range then there is a dip in the curve, the benefits fall to only £598. Also, the ramp-up figures between the two models are different!

Why would the Government penalise people on £35,000? Maybe it is an unintended consequence of the transition into 40&percent; tax. Or maybe it is a way of penalising the poor old middle classes (quietly and discreetly) by ensuring that they do not benefit quite as much as the core labour voters at one end of the social scale and the Senior Managers, Directors and successful self-employed at the other.

Maybe they do not penalise anyone at all and the website implementers just did not understand the rules. It does not bode well for them implementing the scheme properly though! My HR team tell me they think it is a quirk of the Tax and National Insurance thresholds (and NI is just another tax) but they are not completely sure. I talked to one of the providers, and the front line chap was about as useful as a chocolate teapot in giving the answer but he did at least promise to refer it on.

Who pays for this scheme? Well, we do of course. It does reduce tax take to the Government (by letting us keep a little bit more of our own money based on social engineering), but whilst employers get to save some money, there are ‘implementation costs’ as part of introducing such a scheme which could be either relatively trivial or horrendously expensive depending on what payroll package they use. The third party providers are not doing it for nothing and therefore if the parent, carer and employer are not paying for it, it means the Government is. Which of course means that we are, as the only way Governments get money is by taking it off us in the first place.

Then there are the unintended consequences. Whilst the whole scheme is notionally optional, suddenly childminders are going to find that they are going to lose business from parents if they don’t comply. Some schemes are paperless which means the childminder is going to have to get online whether they want to or not. Informal relationships loosely based on co-operation between parents are going to crumble because to get in on the scheme the childcare needs to be registered and/or approved. Some nursery providers are going to regard this as another nail in the coffin of intrusive, punitive compliance, shut their doors and do something else. Some small businesses are going to have to implement it grudgingly to keep staff which is more time and effort for the owner who wants to manage & win business rather than spend increasing time in the office learning and implementing the increasing compliance burden.

Where does it all lead to? The Minister standing up in Parliament in five years time telling us that the voluntary option has failed? ASBOs on Grandparents who look after their Grandchildren? Another Child Support Agency IT “partial success”?

Maybe there was a simpler answer. Maybe the Government should have simply worked out the total cost of ownership of the scheme & simply put it onto child benefit/guardian allowance instead. Or even better, just not taken the money off us in the first place. Regretfully, however, such schemes do not win elections…

Ian Grey

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2 comments to Election bribes

  • GCooper

    Ian Grey writes:

    “Maybe there was a simpler answer. Maybe the Government should have simply worked out the total cost of ownership of the scheme & simply put it onto child benefit/guardian allowance instead.”

    Or maybe we shouldn’t be subsiding other people’s children in the first place. Least of all those on comfortable incomes!

  • Ian grey

    Indeed.