The £100k childcare cliff edge - how is anyone meant to make this work?

[Saladleaf]

I completely understand that on paper, a six-figure household income sounds like a lot. I’m not trying to be ignorant of the fact that many people are struggling far more. But for anyone actually living it, especially in the South East, the reality feels very different once you factor in childcare costs.

We’re looking at full-time nursery fees of around £2,500 a month per child, and I honestly don’t know how families are supposed to make it work once you hit the £100k cliff edge and lose access to the 30 free hours. It’s completely unsustainable.

I know some people say you can get around it by putting more into your pension so your income technically falls below the threshold, but that just isn’t realistic for everyone. With the cost of living, mortgage, and general expenses, we simply can’t afford to take home hundreds less each month. We already don’t have holidays, don’t buy new clothes, and don’t even have a car. There isn’t any more to cut back.

It’s not even about wanting handouts, it’s that full-priced childcare in this country is so eye-wateringly expensive that it makes working impossible for many women. The system actually discourages the lower earner, usually the mother, from staying in work.

A friend of mine is a good example. Her husband earns over the threshold, and she’s just spent years retraining into a new career that she’s passionate about, but is now entry level. We worked out that if they have a baby, it would literally cost them money they can't afford for her to keep working once childcare, rising mortgage payments and bills are factored in. She’d have to give it all up. It’s so demoralising.

And the whole system makes no sense. Two people earning £99k each can claim free hours, but one person earning £100k can’t. Someone on £50k with one child gets support, but a couple on £100k with two children get nothing, even though their childcare costs are double and they are taxed more. It’s not unreasonable to have worked hard, built a decent career and want two children, but the government seems to penalise you for it.

Other countries manage to offer affordable childcare to everyone because they see it as essential. Here it just feels like you’re being punished for trying to do well. For those of us in the South East, it’s even harder. Living costs are sky high, childcare is extortionate, and it’s not realistic to just move somewhere cheaper when your jobs and lives are here.

It feels like you’re being backed into a corner. I find it so demoralising that the system seems designed to push mothers out of their careers, especially when you’ve worked so hard to build one in the first place. AIBU in feeling like this?

15 years ago when mine were nursery age there was no free childcare apart from the 10 hours for playgroup the term after they turned 3. I hardly knew any mums who weren’t stay at home mums back then (though to be honest I hardly know any now either)

Cheap European nannies really are not a thing anymore!

All the people coming on to say "well I managed 10/15/20 years ago" are massively missing the point! COL is SO different now. Also the argument is about how ridiculous the threshold is.

Honestly this was a major factor in me giving up work. Fortunately it turns out I bloody love being a SAHM but I'm acutely aware how dependent on DH it's made me and feel guilty that I'm wasting five years of higher education and all my professional experience. But even though I was reasonably well paid, because his salary precludes us from any help with childcare, once you factor in nursery, after school club and my twice weekly commute into London we're actually better off if I just don't work at all.

One 100k salary covering 2 people, because the lower earning partner now can't work, is equal to two 50k salaries. I hardly think that's astronomical.

This scenario does make you wonder if the policy was ideological in nature. It’s more likely to be the male partner earning the higher wage so the female partner steps back into the home.

It's cute that you think this government or any other would have the intelligence to think with that level of detail.

It’s so bad. I’m in the same position. Two kids in nursery, almost £30k in debt three years in as a result.

It would seem odd for this to be their intention, given the objective of providing support for childcare in the first place is to increase the number of people working…!

Thing is, if you need ft childcare, and don't qualify for the 30 hours, your household income is in excess of 125k - 100k to loose the childcare, plus 25k minimum wage (unless a single parent)
I don't think it matters where you live, that is a phenomenally high household income. While the cliff edge is fundamentally wrong, there should be ways to survive on a household takehome of over 7k a month!

And yes, when mine were young literally my whole (professional) salary went into childcare - we got 15 free hours from aged 3. And life was tough - we budgeted. But costs went down, salaries went up, and now they are at secondary we are comfortable. It's definitely a game of short term pain for the longer term benifits.

When my dc were little I earned £8.50 an hour and the nursery fees were £4.50 an hour. There was no free hours for the majority of their time. I’m not saying this as a race to the bottom type comment just that it’s always been the same and at the time it’s crap and hard work and you don’t get any luxuries or extras in, but it’s not forever. It’s just part of what the deal is when you have children.
I think the sad part is that we have had family men and women in power for pretty-much ever and there’s been very little attempt to rationalise the way childcare works and make it high standard and accessible to everyone. Some of the scandi countries have got brilliant childcare models but we won’t learn from them or prioritise child care whilst they’re a non-voting group! Easier to chuck money at pensioners who will at least give a return through their vote.

This is the problem with means testing. Solution = don't means test. Free childcare for all. Pay for it through increased taxes.

But if you earn o er £100k you do still get childcare help in Scotland. But you pay 45% tax on £75k - £125k so the marginal tax rate for earning £100-125k is 67%. Add in 8% student loan repayment and that’s a 75% tax rate.

There would be a short term gain to this policy. It took time for people to rearrange their tax affairs to regain the childcare hours but it happened eventually and the policy went from on that earned the government money to one that costs the government money. The government are well aware it’s a stupid policy which is bad for the economy but they are also well aware that quite a lot of the public aren’t intelligent enough to know that rolling back this policy isn’t a giveaway to the wealthy but to help grow the UK economy. Taking action to benefit the UK economy like this will damage them in the polls so they won’t do it.

It’s amazing how many people engage in this topic saying it’s fine and just how it is, ‘childcare has always been expensive etc’ - with absolutely no grasp whatsoever of what the issue is for people earning over the childcare threshold.

My immediate loss of benefits for earning 1p over £100k is currently £22,000. To take home £22,000 after tax over £100k, I need to earn an EXTRA £50,000.

That creates a massive incentive to ensure I can claim the free hours - by working part time, by using pension contributions etc. Otherwise I get paid £0 for a third of the year.

It has not ‘always been this way’ - the 30 free hours policy from 9 months (which is the real distorter) was introduced LAST MONTH.

@mustytrusty and @Cantseetreesforthewood above, this may help your understanding of the situation posters are describing.

A temporary expense that potentially goes on fora decade if you have more than one child.

It has changed over the years. My dc are of the age when you used to get 15 hours free the term after they turned 3. So if you had a summer born they were at school before long. We were classed as middle earners I guess but I couldn’t afford to work as my wage would be gone on childcare. I worked around dh in minimum wage roles. There was a recession and we ended up in a lot of debt. I think the only sensible solution looking back is to have bigger age gaps. But there is no perfect solution. I wonder if we are lucky the government pay towards childcare at all. But it doesn’t benefit everyone and never has.

A few reasons why childcare costs are inflated. Ratios in the UK mean childcare workers look after far fewer kids than other comparative countries. Running costs, energy being the big one. We have some of the most expensive energy in the world. The way funding is structured means that people who get the most support with childcare and pay nothing push up the price for everybody else, especially those who have to pay full whack. The only solution if you're a high earner is careful birth spacing (putting multiples aside), or taking a massive salary hit with self sacrifice schemes, someone dropping their hours or quitting altogether. There's no way around it

Another poster not understanding the current situation.

Due to tax and loss of benefits with two in nursery now, I need to earn £150k to have the same net result as earning £99k.

If I earn less than £150k… I actually have a lower net income after tax and benefits, than on £99k.

This isn’t ‘oooh yes but it’s always been hard’ - there’s an income threshold at which unless you earn dramatically more, you are financially worse off. This means people are heavily incentivised to earn less - that is a huge productivity issue (and means the country raises less tax as a result).

I don't disagree with this but there's so much venom directed at public sector employees and calls for their T&C's and pensions to be downgraded, expanding that sector to include childcare workers would not go down well. The only way full subsidized childcare would happen would be at huge expense and at a basic minimum standard. Private businesses would operate as an alternative and you get a two tier system just like schools with cries of inequality and unequal playing fields. I don't know how it does work in other countries but given the "feel" in the UK right now, I can't see it happening here.

These reasons seem like a bit of a nonsense when you look at our childcare costs versus literally every other country in Europe with the exception of Switzerland. It is a government decision, and a poor one.

OP - yes, it is shit. Sincerely, mum of preschooler twins.

And the other side of things - the quality of our childcare seems poor, again down to gov't funding. Disinterested (cheap) apprentices, wages that would be higher at Lidl. It's a government decision that devalues Early Years.

Virtually every other poster in this thread is missing the fundamental point of how economically damaging this policy is both to the parent and the UK. Sigh! This is why we cannot have good taxes in this country.

It is rubbish and at the time £100k was brought in, far fewer people were caught in this and the cost of living / inflation was a lot lot lower.
We’re dumping into pension to avoid it however we are fortunate in that our childcare needs are long gone.

I have no skin in the game any more but yes I agree. This is one of the more stupid ways a government could subsidise childcare and calling it "free" was even more stupid. As was low balling the hourly rate expecting it to fall to that while simultaneously following policies that have increased wages significantly at the lower end, employment taxes, business rates...

I don't know why the subsidy can't go to the parents directly via the tax system (we have examples of that already within Universal Credit, and the "tax free childcare", plus the childcare vouchers that preceded them).

Producer subsidies always have perverse effects. Any Economics student could tell you that.

I think this is the crux of the issue - the number of people it impacted was so small when the policy was made.