Election Bribes

Through a remarkable coincidence of timing, families are being encouraged to save lots of money on childcare courtesy of that benevolent Labour Government of ours, launched & promoted during the General Election.

Within the Grey household, we are fortuitous enough to have both a private and a public sector employer providing our household income stream and both of them have decided to jump on the employee benefits bandwagon of offering childcare vouchers.

The way it works is that an employee agrees to take some of their salary as vouchers (to a maximum of £2,600 a year, i.e. £50/week) and this sum is free of Tax & NI. (The incentive to the employer is that it is free of Employer NI as well). The vouchers can be paper or electronic, they are given or allocated to the carer who redeems them without penalty to the parent and everyone is happy. Or are they?

Well, I’m not. I’ve read the forms & there seem to be some ambiguities in the process, which is somewhat convoluted. What happens if I want residual money back because I don’t need childcare any more? Not covered. What if I want to pay some on one & some on the other? In theory yes, but the forms I have will not cope with this scheme properly. What happens when the third party scheme management Company makes a pig’s ear of the payments to my Son’s nursery (& they will, think every other Government IT project managed by third parties)?

What is even more interesting are the online calculators provided by the service providers, the two of which I have looked at being SodexhoPass and Accor.

Supposedly, the scheme is simple. To quote Accor,

You will save £816 per year if you elect to take £50 per week with paper or electronic Childcare Vouchers and are a standard rate taxpayer. If you are a higher rate taxpayer you will save £1,066 per year.

Sounds good, yes?

However, if you input random salary figures (assuming contracted out to get these results) then £20k salary and £50k salary do indeed give these figures (with maximum £2,600/year vouchers). But, if you input figures in the £32-37k range then there is a dip in the curve, the benefits fall to only £598. Also, the ramp-up figures between the two models are different!

Why would the Government penalise people on £35k? Maybe it is an unintended consequence of the transition into 40% tax. Or maybe it is a way of penalising the poor old middle classes (quietly & discreetly) by ensuring that they don’t benefit quite as much as the core labour voters at one end of the social scale and the Senior Managers, Directors and successful self-employed at the other.

Maybe they don’t penalise anyone at all and the website implementers just didn’t understand the rules. It doesn’t bode well for them implementing the scheme properly though! My HR team tell me they think it is a quirk of the Tax & NI thresholds but they aren’t completely sure. I talked to one of the providers, the front line chap was about as useful as a chocolate teapot in giving the answer but promised to refer it on.

Who pays for this scheme? Well, we do. Not only does it reduce tax take to the Government (by letting us keep a little bit more of our own money based on social engineering), but whilst the employers get to save some money there are implementation costs as part of introducing such a scheme which could be relatively trivial or horrendously expensive depending on what payroll package they use. The third party providers aren’t doing it for nothing and therefore if the parent, carer and employer aren’t paying for it, it means the Government is. Which of course means that we are, as the only way Governments get money is by taking it off us in the first place.

Then there are the unintended consequences. Whilst the whole scheme is notionally optional, suddenly childminders are going to find that they are going to lose business from parents if they don’t comply. Some schemes are paperless which means the childminder is going to have to get online whether they want to or not. Informal relationships loosely based on co-operation between parents are going to crumble because to get in on the scheme the childcare needs to be registered &/or approved. Some nursery providers are going to regard this as another nail in the coffin of intrusive, punitive compliance, shut their doors and do something else. Some small businesses are going to have to implement it grudgingly to keep staff which is more time and effort for the owner who wants to manage & win business rather than spend increasing time in the office learning & implementing the increasing compliance burden.

Where does it all lead to? The Minister standing up in Parliament in five years time telling us that the voluntary option has failed? ASBOs on Grandparents who look after their Grandchildren? Another Child Support Agency IT “partial success”?

Maybe there was a simpler answer. Maybe the Government should have simply worked out the total cost of ownership of the scheme & simply put it onto child benefit/guardian allowance instead. Or even better, just not taken the money off us in the first place. Regretfully, however, such schemes don’t win elections…