AIBU to hope the £100k cliff edge for funded nursery hours is removed?

[horchatatresleches]

News is that the education secretary is looking at nursery funding but it’s unclear if it’s to reduce or increase the support available at either the upper or lower thresholds. AIBU to hope that the harsh cliff edge which stops all nursery funding at £100k is removed or least replaced with something tapered so that people aren’t losing money for being marginally above the threshold?

I agree
if you earn £100k you don’t need funding

I didn’t get any funding for any of my kids until they were 3 and then we got the 30 hours and it made a huge difference to us but we earn nowhere near that! We paid thousands out and still pay a lot for wraparound/holidays.

Also, do you think it’s fair that a single parent on £100k should be worse off in terms of childcare than a couple on £198k? Because that’s quite possible under the current system.

Yes, there's just no excuse either for that policy to exist or for anyone to support it.

Statistically an income of £100k puts you in the top 6%.

It's a good salary but doesn't equate to being wealthy.
Insisting that people who aren't necessarily that well off, but are paying very high levels of tax to dldubsidise others, are excluded from a benefit that would make a huge material difference to them, is pure spite.

Income isn’t the same as wealth. While we’re definitely in a better position than many people, I don’t think one year where my husband’s earnings tipped over £100k (the same year I was on SMP or unpaid) is wealthy. I can’t be bothered to calculate with SMP stretched over a year, but someone above calculated a lone income of £100k is not much more than two people earning the average salary of £40k. We don’t come from wealth, have had no help with house deposits so are mortaged to the eyeballs and expect no significant inheritance either. Of course I’d rather be in this position than the same but DH makes £40k, but when a friend of mine who comes from significant generational wealth (parents have already given her £1M assets and she has no student loans either) I resent being put in the same bracket.

I also have never said I want to be ahead of the rest. I’m not asking for more funded hours for £100k earners but I just want the same. Why? Other posters have talked better than I can about a feeing for fairness about accessing services as well as just funding them, but also the fact this policy reduces tax take and productivity. Doctors have come on this thread and have said they’d be happy to work more, but this policy means they’d be paying significantly more to work more (you need to earn around 128k before the loss of childcare hours doesn’t make you lose money compared to 99k). And people just reduce their ANI to get below the hours. We put extra in pensions, some people reduce hours, take unpaid leave, or don’t go for promotions. That’s money which would have been earned, taxed at a really high marginal rate and potentially spent in the economy doing nothing. And that helps no-one, except the ones who have huge pensions years down the line.

There's a term - High Earner Not Rich Yet - HENRY for short. So HENRYs are the issue we are really talking about.

Often with large debts and outgoings and few assets but they have high incomes.

As stated in the post you quote, income and wealth are not the same thing.

There's a BIG (like millions of pounds) difference between the wealthiest 6% and the top 6% of salaries.

Of salaries, yes.

But the richest 6% of the UK are not salaried.

When the news papers talk about the 1%, they aren't talking about people who earn high salaries. They're talking about millionaires and more specifically multi millionaires.

Indeed. The fact still remains that £100k + represents the top 6% of the income spectrum. No government is ever going to put the interests of those people ahead of the other 94%.

I don’t think they should either. But just stop hammering them to the degree they are.

What's ridiculous is that we've built an economy where families are dependent/entitled to state handouts up to relatively high salaries. All these tax rates and thresholds need to be smoothed out so that there isn't this massive brick wall around 100k. Also, like child benefit, entitlement should be done on combined household income, not one person.

And since we've got the problem that the wrong people are being encouraged to have more kids, whilst the right ones can't afford to, there's a strong argument to be encouraging and supporting higher earners to have children.

Also, the threshold/entitlement at the bottom end certainly needs revising. Why should someone who works 16 hours a week be entitled to 30 hours of childcare? It should match your hours, up to 30/week.

You're weakening the argument here. Don't be so stupid as to say there are wrong and right people who should have children. It is wrong that middle to high earners often feel they cannot afford children, there's nothing wrong with people in lower income situations wanting and having children.

If we are to continue as a country to provide social support to anyone then we need to make access fairer. We do need to make sure access to funding and benefits are available to those who need them to enable them to participate long term in the economy for the benefit of the nation overall. Whether they need the mechanisms to access a small amount of work or to reduce the impact of children on their long term career.
It isn't a problem that people earning above 100k can need this help. Fiscal drag, high taxation, higher interest rates, house prices, high rent, wage stagnation, a generation of parents with high interest student loans, make the "high earner" salary less glamorous then it sounds.

Child care is also a temporary cost, before the availability of state eduction. 20 years ago, £100k salary might have enabled a private education at a local independent day school easily when fees were 12k a year. Now nursery is over double that, people are having to pay it for 2-3 years per child. You wouldn't begrudge the child of a parent earning £100k a state education from 4 until 18 would you? So why are we being so anti child care access for these people too?

Those on about not prioritising the 4% over the 96%, sure but when your paying for the 96% the 4% is not a significant increase. Its a temporary support for people to help them balance family life with their career and long term economic prospects. Let's stop sabotaging eachother shall we? Let's support social mobility where someone without family wealth can be supported and encouraged to continue to grow their career and earning potential. Let's encourage people to be able to have children in their 20s and 30s if they choose to so things like affording childcare aren't the factors delaying children for women into their late 30s and 40s where pregnancy becomes statistically more dangerous.

In the grand scheme of things, its such a small cost for such a big benefit.

Getting rid of the cap would be in the interests of everyone, not just the highest earners though.

That's kinda the point that the optics of punishing the highest salaried earners are more important than the reality.

Fwiw a lot of the richest people - who don't draw a salary - can often just hide this anyway and still get the childcare because much of their life style can be attributed to the company they own.

Getting rid of the cap would be in the interests of everyone, not just the highest earners though.

How does that work?

It’s incredibly crass to complain about the downside of earning over £100k
An obvious solution is for childcare fees to be treated the same as pension contributions and stand outside of taxable income.

Well.

1. high earners would be less incentivised to manage their earnings below £100k with pension contributions, buying holiday, going part time etc. meaning that the actual tax take would likely increase (60% Tax trap is another massive disincentive though.) I don't have figures, but if the government weren't hell bent on delivering an ideological shafting, they might even see it become cost neutral - for this also read VAT on school fees.
2. Higher earners will be less disincentivised from being more productive and chase progression (again, the 60% Tax trap is another massive disincentive)- increasing tax takes and promoting greater entrepreneurial spirit and risk taking which is sorely lacking in our economy at present. This is vital to growing GDP per capita which is the measure of our collective prosperity.
3. Encourage higher earners to have more children rather than making a large family unaffordable for higher earners. We have a top heavy population that is addicted to welfare and dependant on the NHS. This will only get worse over time. We need more working age people that are net contributors. Current policy appears to disincentivise high earners from having larger families, but removing the two child benefit limit appears to incentivise having larger families for parents that are not able support themselves. its perverse.

There are probably more benefits if I thought a bit longer, but that's enough for now.

1. high earners would be less incentivised to manage their earnings below £100k with pension contributions, buying holiday, going part time etc. meaning that the actual tax take would likely increase (60% Tax trap is another massive disincentive though.) I don't have figures, but if the government weren't hell bent on delivering an ideological shafting, they might even see it become cost neutral - for this also read VAT on school fees.

No, you don’t have figures so it’s pure conjecture. Assuming it’s true, the increase in tax take would be insignificant or, as you say, cost neutral so of no benefit to tax payers generally. Incidentally the current taxation regime was the work of the last government so hardly ideological.

1. Higher earners will be less disincentivised from being more productive and chase progression (again, the 60% Tax trap is another massive disincentive)- increasing tax takes and promoting greater entrepreneurial spirit and risk taking which is sorely lacking in our economy at present. This is vital to growing GDP per capita which is the measure of our collective prosperity.

Entrepreneurs and risk takers are highly unlikely to be on the PAYE regime.

1. Encourage higher earners to have more children rather than making a large family unaffordable for higher earners. We have a top heavy population that is addicted to welfare and dependant on the NHS. This will only get worse over time. We need more working age people that are net contributors. Current policy appears to disincentivise high earners from having larger families, but removing the two child benefit limit appears to incentivise having larger families for parents that are not able support themselves. it’s perverse.

So we have the right kind of children (those born to those earning over £100k) and the wrong kind of children (those born to families whose low pay requires a tax funded top up). We should be encouraging more of the right kind. Do I have that right? Nice try but no cigar.

No I don't have the figures because I don't work at the treasury. I was speculating that removing the cliff edge may be cost neutral.

Entrepreneurial spirit is not just about business owners themselves. As an aside they will pay tax even if not directly via PAYE. But growth and entrepreneurship brings jobs and growth, and therefore income tax. And drives GDP. We're adding treacle to the road.

You have gone for the most cynical interpretation of point three. We need a working age population. We need to be having children. But disincentivising high earners through drop offs and double tax, who pay their way, while simultaneously encouraging people who can't support themselves is a kick in the teeth. It is further increasing the burden on taxpayers while removing responsibility from non-tax payers. It has nothing to do with the "quality" of the children.

And I cant afford cigars thanks to the current regime.

Nooo OP, we have to pretend that everyone on £100k is fabulously wealthy! (I say this as someone making less than a third of that). It's in everyone's interests to remove disincentives like the £100k cliff-edge - if people can accept pay rises and promotions without incurring tax penalties then productivity goes up and we're all better off.

Why is it crass to complain that my husband earning a bonus would leave us tens of thousands worse off as a household than if he hadn’t? We moved it to pensions like everyone does in that situation to avoid it, but even if the childcare came out of gross not net salary, it’s still a significant loss. I can’t think of a single person who wouldn’t complain that working more and increasing their earnings cost them money.

I'm not a high earner but the fact is that high earners (high being relative, as salaries in the UK are absurdly low) shoulder a disproportionate amount of the tax burden. Average earners are not net contributors, and HNWIs get away with paying absolutely fuck all because they're a law unto themselves. We need high earners to be having kids, staying in work even if they could technically afford to retire, growing their businesses and so on. Trust me, I envy people on £100k very much, but they are not "wealthy" - they are overwhelmingly highly experienced and qualified people selling their own labour - and it's in everyone's interest to keep them working and paying taxes because we need some net contributors to keep things running.

I can’t remember if I’ve linked this or not, but someone on Reddit submitted a FOI request and the Treasury has said they have no idea loss of tax take because of this cliff edge. One has to imagine it’s significant because everyone between £100-125k will be reducing their ANI to below the threshold, anyone with two children at nursery as well as many with one child earning below £150k will also be reducing to <£100k ANI. That means that the tax take for all of these situations is lower than without the cliff edge, and the funded hours are given anyway so a double loss. If the funding were universal a lot of people would take the money even at a higher rate. The financial significance to those at <£125-150k of the funded nursery hours means that people are adjusting their taxable earnings to get the hours anyway because no-one wants their work to cost them money, so any tax take on that income is surely better for the Treasury than the nothing they’re getting now.

What is probably impossible to quantify is the impact of people being forced to overpay heavily into their pensions young, and retiring earlier than they would have because of it, which again reduces tax take on years of careers.
https://www.reddit.com/r/HENRYUK/s/EOCHCN1uQb

One has to imagine it’s significant because everyone between £100-125k will be reducing their ANI to below the threshold, anyone with two children at nursery as well as many with one child earning below £150k will also be reducing to <£100k ANI.

Imagination isn’t fact. Obviously everyone won’t be doing anything. This fails to take into account the fact that only a small percentage of workers in that salary bracket are the parents of small children. It also fails to take into account the many people whose focus isn’t paying as little tax as possible.