New childcare tax break to be announced by the Government today - what do you think?

[JaneGMumsnet]

David Cameron and Nick Clegg are due to unveil new childcare plans in a joint press conference today, with further detail expected to follow next week.

According to reports, families could be entitled to claim up to £2,000 per child every year from their tax bills, to cover the cost of childminders and nurseries as part of a new government scheme to help families.

The new measures will not be means tested, and will replace the current voucher and allowances scheme.

We'd be interested to hear what you think of these proposed changes, particularly in the light of the changes to child benefit which have been implemented today.

Thanks,

MNHQ

[AnAirOfHope]

If both myself and my husband worked we would earn £30k pa before tax combined. We have two children so childcare would cost £17k full time for two per year leaving us with £13k per year to live on.

So dh works full time for £15k pa and i stay at home raising our children and earn nothing.

Dh is disabled and cant look after child but i have a BA(hons) so more qulified and more likly to get a better job but no as im a women and work in the same industry and job as my husband!

There needs to be affordable childcare to encourage women to work.

Also i feel its ok to have five year breake as im still only just 30 and have 40 years to build a successful work life.

[olgaga]

If those without work know that the £50k mother on h er own as the same money as they do presumably they have sympathy for her if they find their own money rather short?

No I don't think so. As you yourself keep pointing out, the fact that she has stayed in work means she hasn't suffered loss of earnings or pension and can expect her standard of living to increase. The amount she is paying in childcare will be greatly reduced once her child is at school, so her misfortune in relation to childcare costs is for a few years only. Then of course she is also investing in a property, which is a realisable asset.

Her only sacrifice is the same sacrifice we all make when we have children, in that they cost a lot of money to care for - whether you stay at home with them and lose earnings, or you choose to pay someone else to care for them.

She is, and always will be, in a vastly better position than someone on benefits of £26k, much of which she doesn't see as it goes straight to her landlord - and who, like 90% of the working population, will never earn anything like £50,000pa.

[LexyMa]

Ok, I'll give you a new straw man here and fess up to not really feeling the pinch at the moment. Together we earn just over 100k gross, live in a two bed ex council terrace, run one car for my commute and DH takes the train. I don't think we are much worse off with one child than we were without.

Yes, we paid nearly £1k a month from 6m to 3y and since then we are paying more like 600/m. I worked out how much tax was saved from this earlier in the thread. Come Sept I am likely to be on ML again as DS starts school, but when I go back to work we will either juggle our working hours (possibly both going 80% of full time) to be there at the start / end of the school day or pay for childminder and breakfast club for him and FT care for DC2. But the expenditure we have so far foregone by being parents (i.e. the drinking money, extravagances, holidays) more than outweighs the nappies.

I doubt DS makes an appreciable increase to our heating, washing, food bills. Breastfed exclusively until I went to work, then weaned on the same food we were eating, plus morning and evening breastmilk. Have never bought a jar of baby food and could probably count on one hand the baby ricecakes I may have grabbed in an emergency. I've been tight enough sometimes to give him the mini jug of milk you get with a pot of tea in a dept store cafe.

We drink less booze (at home and out) go to fewer concerts, restaurants, clubs, etc. We go to restaurants as a family (have done since he could sit up) and he eats tasters from our meals and drinks water. Have only ever used the "children's menu" at pizza express. So rarely have babysitter costs. We think more carefully about the value for money of a holiday and mostly don't bother. We have spent little on activities like softplay because of already having paid (through council tax) for public parks, nature reserves and playgrounds, so we get the use out of those. We buy a lot second hand - toys, clothes, buggies.

We have the same size house as we would without a child. We have sunk 40k into extending it, from 1 to 2 reception, 2 to 3 bedrooms. I've no idea whether this will be reflected when we sell but it will enable us to live here very comfortably with 2 DC as long as we need to. We'll therefore move when job economics says so, not family size.

I think (as my epic post comes shuddering to an end!) that my point is for working parents the only real cost driver in having children is childcare, and it increases more than pro rata for subsequent children. Everything, absolutely everything else that I can think of, has cheaper or free choices available. Take Childcare Costs From Gross Pay, I say, but I can't see this being done other than through linked tax self assessment of both parents (no matter how much under HRT threshold the second earner makes) and therefore lose the principle of independent taxation (which we already have with the CB grab)

[AnnoyedAtWork]

It's simply not true that childcare costs greatly reduce once your child is in school.

Often before and after school clubs do not start early or go late enough for parents to work full time. This is the situation I and many other London parents are in.

So then you have to employ full time nanny or send child to private school that has long enough hours. Therefore you can expect to pay equivalent of full time day nursery place for 11 years.

[AnnoyedAtWork]

11 years of £1k per month if you have one child. What about if you have two? People on middle incomes are being discouraged even prevented from having children if they want to stay in work.

[LexyMa]

quite agree, MLB, hence why one of my options is for both of us to drop hours a bit and work 'staggered shifts' to be able to avoid too much before/after school costs. We would rather forego that income (and not be taxed on it either) and avoid paying VAT-ed (I think, correct me?) prices for a childcarer who is also paying income tax. The government takes three slices there - follow the money.

[Xenia]

LexyMa, yes, it is the labour costs. That wasn't so in the 1800s but none of us want to go back to that level of poverty in which the poor lived. Either one of you gives up work so you lose a whole wage or you pay chidlcare. If people are lucky to be in careers where there will be progression then keeping working often pays off longer term and protects you if one of the two careers goes wrong later. If you would always earn hardly anything and it doesn't cover childcare and you can stay sane not working then it may pay to stay home.

I am not sure it is any worse now than when we had our first children in the 80s when no one got tax credits and there were no childcare vouchers (not that I've ever had either of those anyway). It was really expensive then even without a minimum wage. We had 3 under 4 and both worked full time at which point a day nanny can be cheapest - economies of scale.

The child tax allowance which many nations give those in mid life with children as it is for all of us even if we earn a lot of money our most expensive time is now going from those over £50k - £60k. So that means people need to plan - you know the years you have children will be the most expensive so may need to save.

My grandfather did not marry I think until age 40 so as to be able to pay for a family. (He lived in a boarding house with 26 other young men in 1901 census). My parents were married for 13 years before they had children as my mother taught to support my father whilst at medical school. Today I am sure a lot of mumsnetters don't have as many children as they'd like due to cost or wait to have them until they can afford it. May be nothing has changed.


If you pay childcare to a daily nanny who is your employee then that comes out of taxed income. So roughly you multiply at 1.666% if 40% tax. So Say she is paid a gross wage of £25,000 for 40 hours a week that means 41,665 of gross income if you pay 40% tax or about £20k for each of the parents - never let women be saddled with childcare costs - men need childcare too so they can work. Then you might have to pay her tax and NI on top of the £25k. YOu have to pay employers' NI too at about 12%. Anyway it's expensive. Or my mythical £50k single mother I had her paying £14k a year for one full time nursery place.

[takeaway2]

LexyMa - that's what we do too. The dh now works from home (self employed, own practice) and therefore can do most drop offs and pick ups. Having said that, to extend our work day, we now use a combi of shared pick up with another family, afterschool club till 6, activity clubs after school like tennis etc so that we both can work the necessary hours. The younger child is in nursery full time.

[curryeater]

LexyMa, you are basically boasting that before you had children you had a medium sized house (rather than a poky flat) into which you can now fit children, and went out to expensive enough things (holidays concerts restaurants) that cutting them out makes a difference. Bully for you, well fucking done. Your income is high, you do not feel the pinch, jolly good. Of course you don't feel the pinch. you have a lot of money.
I sense a self-righteous tone in the catalogue of things you don't pay for - no jars, no babysitters, second hand kit - what the flying fuck do you think everyone else does? I think there is hovering in the back of your mind a single mother (gasp) with a new bugaboo, formula, sachets of baby food and lots of new branded baby clothes. Or something.
And what is the point of saying "oh only the childcare is non-negotiable" in that airy tone - I KNOW, and it is costing us about £18000 a year, and that is out of our net. That might not be much to you, but it is killing us, so what does it matter that we never have a ready meal - for adults or children?

[Glittertwins]

How on earth can you only give a 5 yr old tasters from your own meal if you go out and say that your DS doesn't increase the food bill on your groceries? Do you really know where your money is going? Our two easily eat an adult portion between them and they aren't quite 5. I categorise our spending and on top of school meals at £20 per week, they also have at least another £10 of food attributed to them on a weekly shop. That's getting on for £120 per month which is virtually child benefit in one go, never mind paying for after school care on top.

[LexyMa]

I'm sorry that's how it came across, curryeater. We earn more now than we did before we had DS (which was still healthy, probably 32k each). We had a typical 20-something graduate/working lifestyle, such as we were taught to expect in the late 90s when the aspiration was that 50% of people would go to university and magically become professionals. If I'm stating a list of the blinding obvious you don't have to take it as aimed at you, the thread's in site stuff which I take to mean it provides some examples for MN spokespeople if they're invited to contribute to a consultation.

We both grew up in families where money wasn't exactly flowing and so I guess we know to cut our cloth. I tend to assume (usually wrongly) that everyone drops the luxuries when another call on funds is coming. If our families had lost their jobs in the 80s, there was no safety net whatsoever. So that determines how we approach starting a family.

my point is the same as yours, with less swearing. The only barrier to more employment of parents, male or female, is childcare costs. Everything else is scalable.
Glitter, he is 3. Portion sizes in restaurants are extravagant, that's how we can choose mains and sides for two, and at home our cooking habits changed when we anticipated working long hours - batches in the freezer. I am saying nothing new here compared to the tips in 'credit crunch'. And I am well aware of how lucky we are to be able to repay the country's investment in our schooling/uni by working and earning a decent gross amount. Like everyone else I wouldn't mind keeping more of it, and on this thread that would mean untaxed childcare.

[olgaga]

Xenia: If people are lucky to be in careers where there will be progression then keeping working often pays off longer term and protects you

Exactly. So don't expect sympathy from those out of work, or who work for the minimum wage.

Lexy: The only barrier to more employment of parents, male or female, is childcare costs. Everything else is scalable.

Quite.

Which is exactly why there is no point in struggling to work full time and pay for childcare if your earnings are low and you have a job rather than a career with progression. You end up working for nothing - no mortgage, like your single mum on £50,000, just childcare. There is no point working for nothing.

If you're in that position your earnings are always going to be low, unless you are qualified and decide to have a family before you begin your career - then you can expect to earn and progress.

Or you do like I did, (and Xenia's granddad) and have your career, get yourself financially secure, and then have children - but for women that brings the risk of dodgy fertility - I was lucky to have one at age 41.

All I'm saying is: when the Government is giving a clear message that you shouldn't have children you can't afford, they aren't just talking to benefit claimants. They're talking to all of us!

The changes to child benefit aren't really an issue. The lower paid will keep it. We will all see our personal tax allowance rise slightly. The higher paid who use childcare will replace their lost CB through a small tax advantage. We're all in this together!

Except - those earning the most can look forward to a very healthy tax cut far higher than that enjoyed at any other level of earnings.

Which tells you everything you need to know about this Government, and whose interests it serves.

Take note for 2015.

[Glittertwins]

We've always cooked from scratch and they were weaned on food that we eat. I just think you are being a little naive if you don't think he is adding to the food bill when he will be as the food cooked gradually will not go as far as it used to.

[LilyBolero]

lexyma - wait till your kids are older, that's when they reaaly start to cost loads (not including child care in that, as that is variable);

ds1 at secondary - £600 a year for a bus pass (no other options, just have to stump up the money every month), uniform costing £100+, once you include sports kit, blazer, tie, jumpers, gum shield, shinpads etc etc etc - it just goes on and on, school trips start to be more expensive - they are 'expected' to do a residential trip either Y7 or Y8, costing several hundred pounds. Then any clubs they do out of school tend to be really expensive too.

They might fit into the household regular budget when little, but it doesn't last long!

[Xenia]

Lexy is right that with under 5s the biggest cost is childcare. Someone paying £18k above. I am sure we paid £25k (3 children under 5, both worked full time , nanny in today's money and even then that would be skimping it compared to the more expensive nannies and had we lived in inner London). It is very expensive and nothing like as expensive as the kit for the baby which we bought at church jumble sales and economised on and the baby only drank my milk for 6 months etc.

Teenagers is not really in the debat as say £20k full time childcare is always going to cost a huge lot more than even the more expensive 14 year old wanting new trainers. They are unlikely to cost £20k a year, even with day school fees they will only just cost that. I suppose my two probably do cost £20k a year plus and even more if you include the cost of additional housing./

However the bottom line is childcare is expensive. In some countries with loads of poverty you can have live in servants who cost hardly anything but none of us want that. Most of us probably do not want 60% tax rates which we might need if we gave free childcare for all. Women who doesn't work would not support that given the higher taxes and nor would the retired so it is not likely to go forward as a plan. So there will be some minimal help of £2k a year for the poor and those on middle incomes paying nearer £20k a year for childcare will laugh at its derisory nature and get back to their hard work hoping long term it will pay off.

I think women in low paid jobs though should consider they coudl get promoted. It is not that rare that if you are on the tills at Tesco and are pretty good you might move up the organisation so do n't lose hope. If you keep a job and are good at it and seek new jobs and promotions long term it can pay off.

[ceeveebee]

My twins are only 14 mo but I have had to increase portions by equivalent of another adult in the house eg I cook 3 chicken breasts for the 4 of us. Far more laundry liquid plus related electricity and heating on more often as they're at home with nanny.. Also nappies, wipes, cows milk, bread, pears etc all things I never used to buy So I reckon shopping and utility bills are probably up £200 per month. Drop in the ocean compared to childcare costs and reduction in earnings though - nanny costs £20k per year for 3 day week and I've taken nearly £50k salary reduction to go part time. So we're massively worse off than before DCs.

[Xenia]

Yes, having my children 4/5 (twins) was the most expensive thing I could have done.

The thingi s for women or men who go part time it is not just the loss of income it is that in many cases it is hard then to get the promotion you want. You may stop being on track to earn double what you had been earning so you half your pay to go part time and then you lose the change to earn double what you had been earning not just now but for 30 more years...which is why if anyone has to take those risks let it be men.

[curryeater]

Sorry if I sound bitter.
the other massive expense you can't budge on is housing. It costs a fortune. People who bought at the right time don't get this. People who have to buy now or pay rent are crippled by it.
I never used to give a second's thought to people saying "why do I bother working?" but only now am I beginning to doubt this whole modus operandi. Not seriously, but I can see why people say it. I always thought: better to earn your own money, then you have choices. On benefits you can't change your work situation for more day to day satisfaction (even small amounts of work affect benefits, and a life with no work at all would surely start to pall badly, or so I have found it when unemployed and looking for work); you can't move house easily; you can't have holidays (nothing left over) or plan or save (nothing left over); but actually all those things are pretty much like my life now.
Still I would rather work than not and don't remotely envy those who can't get work, still less those working full time and on benefits to top up low pay.

[curryeater]

And as ceeveebee says, it depends on what you are comparing it to when you say food costs / housing costs don't go up when you have kids. I have never thrown food away, never shopped casually, always used leftovers and emptied the fridge before shopping again, so yes I do notice two hungry little people who don't eat as much as an adult but as ceeveebee says, between them it is about as much as one adult between them for some things; for others, off the scale (eg they both drink cows milk now, in pints it seems, and in porridge, which is something I hardly needed to buy before)

[LilyBolero]

not to mention the sheer amount of milk they seem to get through!!!

[ceeveebee]

I know - we used to buy maybe 2 pints a week. Now it's 16!!

[Glittertwins]

Exactly what I was saying. 2 twins = 1 adult portion!

[Xmaspuddingsaga]

Oh watch out Lexy Mae that is what we thought too. (Similar income) the change of having 2 financially cannot be overstated, and it is all sorts of things you may never have thought of.

[Xenia]

But even so the biggest cost is childcare or losing a wage....not matter how much milk they drink (and I am anti milk so I suggest those spending a lot on milk would be better off giving their children tap water)

[LilyBolero]

xenia - the comments on milk/food etc are directly in response to the post from lexyma stating that children do not represent an extra drain on the household budget. In my response, I excluded childcare from it, simply because it is so variable - some people will have grandparents to hand who will do it for free, others will be paying private nannies, and every variable in between.

fwiw I think childcare should be dealt with separately - ideally to be a taxable expense.

The telegraph has a good solution to the whole child benefit dilemma, which is to scrap it entirely. But, you then look at personal allowances, because the purpose of a personal allowance is to allow a person to earn a basic subsistence amount before tax kicks in. So if an income is supporting 3,4,5,6 people, it makes sense that they should all have a transferable personal allowance as well.

Then for low incomes, include that amount as part of the universal credit.