Government confirms support for 100%+ marginal tax rates over £100k for parents with under-5s

[MidnightPatrol]

Mumsnet has hosted a ‘sponsored Q&A’ about the new government childcare offer on which multiple posters queried the cliff edge on childcare support at £100k. The questions were responded to today by David Johnston MP, who is Minister for families.

Reasons to query the £100k cut off:

• The combination of loss of personal allowance and childcare support means on earner on £99k is better off than one on £134k if they have two children
• A mother with twins being unable to justify going back to work as the nursery is more than her income, and they are not eligible for support due to husbands income being £100k
• Pointing out that with the high cost of childcare in London (£2k+ a month common), plus housing expenses, the loss of support was significant
• Highlighting that a family earning £198k might be eligible but not one earning £100k which seemed unfair (particularly single parents)

The response from the MP to all of this…

“We want to make sure that government funding provides value for money and is able to support those who need it most, which is why it is necessary to set an eligibility threshold and only a very small proportion of parents earn over £100,000.”

What utter bollocks! Classic pre-prepared non-statement that fails to address the questions.

Whole thread here: https://www.mumsnet.com/talk/sponsored_qas/5002680-do-you-have-questions-about-the-governments-new-childcare-offers-ask-the-minister-for-children-and-families-david-johnston-mp

I read that. I think it's a disgrace and I have absolutely no skin in the game as neither DH nor I will ever earn anywhere close to that. Our combined household income isn't much over half of it. But I still think the funded hours should be universal entitlement for families in work.

Also in response to the question ‘why doesn’t the tax free childcare amount increase to reflect inflation or the increase in cost of childcare’…

“The £2,000 Tax-Free Childcare top up has been at this level to strike the right balance between helping parents with their childcare costs and managing the public finances in a responsible way.”

Why did they agree to participate in (or suggest) such a Q&A if they were going to give such meaningless responses?

Do they think we are all stupid?

It’s a bit rich for them to claim the rationale is to ensure help is targeted at the right people, while ignoring that

• a single parent with £100k income a year would be eligible for nothing
• A couple earning £198k could be eligible for a benefit of £20k+ a year

Doesnt scream ‘targeted strategy’ really does it.

Yep it was a bit of a pointless Q&A really.

I wouldn't be surprised if more higher earner parents go down the "kids' dad lives at his mum's" route which has been so common with UC. Not supporting it but it would make com0lete sense financially.

Part of me thinks they want to encourage people with high earning potential to have kids younger. If you know you are going to earn that at 35 but won’t at 30, have the DC younger?

Why do you think they are trying to encourage high earning people to have kids younger?

What benefits would that bring?

I’d query having kids very young probably makes earning those higher salaries difficult (particularly for women).

I think you're giving them too much credit for the level of thought involved.

Surely the cause of this issue is the same as the high income child benefit charge - independent taxation means you can't assess eligibility through the tax system on a household basis, only individually.

I'm not really keen to push to abandon independent taxation and revert to a woman's income being reported on her husband's tax return.

If you think about it on a whole population level, if top 1-5% have children even 5 years older and their children then have DC 5 years earlier too then we have good little educated workers coming through and supporting the system earlier.

Good little educated workers who earn well and support the rest is what the Government wants.

There are advantages in everything. Let’s say an incentive for a young successful couple to each earn 98k rather than the man 150k and the wife stay home, actually helps productivity long term as she works too. It may even lead to greater equality between the sexes and be a good model for their own children, especially girls.

All I am saying is that there are arguments in favour to incentivise this way too.

High earners should drop down to 4 days to keep their earnings below the threshold for a few years, if they want to benefit (or put excess money into pensions). There are always ways to get the most out of the system.