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?

Could you explain your position on this a bit more, please? Why do you think they shouldn't get help?

Why did you not put it in your pension?

I’d already maxed out pension contributions.

Why not? Could you please explain? It might be helpful if you use costs and actual figures to demonstrate why they should not be subsidised

Apologies, I didn’t mean more as in extra.

100k just seems such a big salary to me and those talking about 70k bonuses just seems so out of touch to those like me on a public sector wage.

I apologise if I gave the impression that those on 100k are expecting more or are any less deserving because they’re not. But…there just isn’t enough money to go round. If you pay more tax but more services are given for free or subsidised, then surely more tax is needed to pay for it. Or maybe I’m just looking at it from a simplistic view point.

I pay more tax than someone on minimum wage but they may be entitled to more benefits and services than I am. So the argument that everyone should get the same means that I should get UC like they do because I’m paying towards it.

I got divorced and was initially entitled to UC. I increased by hours and my pay increment increased and therefore I am no longer entitled. Yes, I’m worse off but I’m grateful that by earning more I can pay more into my pension and hopefully in the long term will be better off. But I don’t expect UC because I’m paying tax towards someone else getting it.

We are in a crazy world where 100k isn’t enough to live on.

Then you don’t understand how the economy works.

That £100k doesn’t purely line my pockets because I earned it? I pay a ridiculous rate of tax that funds schools, hospitals, policing…. Probably end up with the same as a middle manager.

So I get penalized for doing well, the pension relief disappears, along with minimal childcare tax relief (I’m still paying for it) and I wonder what the hell I’m working for.

All the higher earners will purposefully keep themselves under the threshold and then you’ll realise how little money there is to go around when we are no longer funding UC, everyone else’s childcare and housing benefits.

The other issue that the cliff edge creates is that in relationships with one high earner and one low earner, it discourages the low earner from working because it's cheaper for them to be a stay at home parent. This put women in particular in very vulnerable positions. It's an area over looked in terms of domestic abuse.

If free child care was available for partners in this scenario it potentially keeps them in the workplace and adds another taxable income to the treasury too.

So there's several ways in which the cap actually costs the treasury.

It's be interesting to analyse whether it actually saves the treasury or costs the treasury more to cap funding at £100k.

If a large portion of taxpayers are deliberately keeping themselves under £100k because of this cliff edge, and inflation is putting more and more people in this position each year, then we are gradually destroying the UK's potential tax intake. Especially where people are going part time, not pursuing promotions, most won't suddenly bounce back to the career progression they would have had, once their children hit school age.

At that point (£230k income), it is surely better to just accept the tax and loss of benefits; you will be better off by doing so, even with 2 in nursery full time.

A probably 75% tax rate on earnings £100-23k, but still more in your pocket vs staying at £100k + £60k in pension an claiming childcare.

Someone on Reddit submitted a FOI request and they don’t know the lost tax revenue for people making sure their ANI is below the cliff edge. And if they had the data if anything it would be an underestimate because it wouldn’t show those who have cut hours, or refused bonuses, or not gone for a promotion because of the policy.

It wouldn't at all surprise me if the cap was actually costing us more than if we just paid for childcare.

Dropping the cap has been estimated to cost £200m, while dropping the policy would be estimated to raise £100m more in tax. That’s a ‘what would happen this year’ answer. But there are also benefits going forward, in that the lower paid partner who kept working would have a more successful career and would earn more in their lifetime and pay more tax.

Then there’s the other benefit of more doctors appointments being available etc. the reason this policy is probably not going to be changed is the optics of the change would be bad. Just like many, many sensible tax policies that would boost growth etc. if the optics look bad it prolly won’t happen.

Also people who've been pushed into making a lot of salary sacrifice into their pensions are likely to retire early. If you let them have it and spend it now, they'll probably work longer too.

And there’s also the cost of means testing the benefit as well.

Anyone earning that sort of money starts losing the tax threshold. You are also paying a lot of tax and NI. I have no problems with giving something back to you.

And are likely to be living in London. And are likely to be paying an extra 9% of income on student loans.

I think you are confusing pension taper with maxed out pension contributions.

I was earning approx 160k and putting 60k into my pension. My bonuses were around 20k pa meaning they would all be taxed at 62% leaving me with 7.6k. The loss of funded hours and tax free childcare would have been far more than 7.6k meaning if I took any of the bonuses I would have been worse off.

The ridiculous thing now is that I do of course take them now my DS is at school and accept I have to give 12.4k to the state and keep only 7.6k. If even that was available while my DS was of nursery age I’d have taken the money.

Over the course of 3 years my employer retained the 70k whereas even with a punitive 62% tax rate I would have taken the cash keeping 26.6k myself and handing the remaining 43.4k to the government but apparently that wasn’t enough for them so in the end they received nothing at all.

That 43.4k on its own would have been the equivalent of not far off 10 years tax take from someone earning 30k.

The system is so broken.

Oh right you said they receive not far off 100k in benefits, I took that literally rather than the equivalent net salary of someone earnings not far off 100k.

Although that is still much higher than the cap, so there would be a number of factors (generally disability or pension) that would enable someone to receive that much.

If anything you're not looking at it simplistically enough.

If your view is based on a belief there's not enough to go round, it's illogical to support a policy that makes some people choose to work less, thus meaning they pay less into the pot and their skills aren't as available.

Agree with this, since it pushed me out of work completely. We had twins, so double whammy for childcare, and my low salary would have been all but swallowed up. This seems like such an obvious consequence that it's almost by design, but surely it's not what was intended? It can't be good for the economy?

Exactly. It's a classic populist policy that actually ends up doing the opposite to its intention because it doesn't go down well with a particular group of voters who don't actually understand it's effect in action.

Working isn't purely for 'financial sense', it can also about a sense of identity, diverse lifestyle and longer aims (not to mention pension contributions). The cut off of accessing funded hours will always deplete financial sense, no matter what the job or salary.

My DD and her partner had been facing this - but both decided to work part-time - have ended up better off as only need to put children in nursery for 30 hours per week as one of them at home plus they are also eligible for child benefit. And quality of life

Yes working has other benefits, and many wealthier or older people stay in work when they dont absolutely need to, for those reasons. But very few people will want to actually pay to go to work, particularly when they need that money for their young children.

Actually, many women can and do because it means less loss of earnings later in life.