Childcare tax breaks risk helping the rich the most

At present, there are almost no voucher recipients among the poorest 40 per cent of households.

In the week that parents earning over £50,000 saw their child benefit cut, the speculation is that the government intends to introduce tax relief for childcare, possibly making those who were worse off from the child benefit change, better off once again. In the absence of an announcement from ministers, we will not know what the government actually intends to do until next week’s announcement. But the talk is of the introduction of basic rate tax relief for childcare worth £2,000 a year per child. How the scheme will work is anyone's guess but, even without the details, we can already speculate that this is a policy that is likely to help the better off more than the ‘strivers’ the government says it supports.

The government already spends £700m a year on tax relief for childcare through employer supported childcare vouchers which look likely to be scrapped following the introduction of tax relief. It’s a voluntary scheme that employers can offer which gives their employees basic rate tax relief on £55 a week of childcare costs (less if they are a higher rate taxpayer). Resolution Foundation analysis shows that 50 per cent of people who used vouchers in 2010-11 were in the top 20 per cent of households (see graph). Almost no voucher recipients were found among the poorest 40 per cent of households.

Position of childcare voucher recipient households in the income distribution, 2010-11

At the moment, whether or not you can benefit from vouchers depends on whether your employer offers them. In this respect, the government’s proposal could be an improvement if it is available to all. But assuming it works in a similar way to the existing vouchers, it is likely to be of little benefit to low paid working families who struggle most with the costs of childcare. Under the current scheme, those who do not earn enough to pay tax cannot benefit at all and those who qualify for tax credits are only marginally better off if they also take up vouchers. The argument may be that tax credits are there for those on low income and tax relief is there to help the rest. But let’s be clear that the government may be about to make a major investment in childcare that barely benefits low income working families, while offering help to the richest.

Other choices would have been possible. The Resolution Foundation’s Commission on Living Standards recommended an extension of the universal entitlement to childcare for three and four year olds from 15 hours a week for 38 weeks a year to 25 hours a week for 47 weeks a year. This would make it easier for more mums to work part-time than the current childcare entitlement which is what most say they would like to do. The extension would have benefited all families with young children, including the better off, but importantly would have also helped the least well off.

Among the details of the government’s proposals that will be made clear next week is how the scheme will be administered. There seem to be three choices. The government could extend the current employer scheme but make it compulsory for employers to take part. This seems unlikely given prior commitments to cut red tape. Tax relief could be claimed by individuals through the self assessment process but this also seems unlikely given criticisms about a similar approach introduced to deal with the messy child benefit change. The third option is to force providers to administer it and claim tax relief on behalf of parents. If this is the preferred option, the government will need to ensure that the extra money is passed onto parents in lower fees. Otherwise, this could end up being a subsidy to struggling providers rather than a benefit to squeezed parents.

David Cameron during a visit to a London Early Years Foundation nursery in London. Photograph: Getty Images.

Vidhya Alakeson is deputy chief executive of the Resolution Foundation

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The economics of outrage: Why you haven't seen the end of Katie Hopkins

Her distasteful tweet may have cost her a job at LBC, but this isn't the last we've seen of Britain's biggest troll. 

Another atrocity, other surge of grief and fear, and there like clockwork was the UK’s biggest troll. Hours after the explosion at the Manchester Arena that killed 22 mostly young and female concert goers, Katie Hopkins weighed in with a very on-brand tweet calling for a “final solution” to the complex issue of terrorism.

She quickly deleted it, replacing the offending phrase with the words “true solution”, but did not tone down the essentially fascist message. Few thought it had been an innocent mistake on the part of someone unaware of the historical connotations of those two words.  And no matter how many urged their fellow web users not to give Hopkins the attention she craved, it still sparked angry tweets, condemnatory news articles and even reports to the police.

Hopkins has lost her presenting job at LBC radio, but she is yet to lose her column at Mail Online, and it’s quite likely she won’t.

Mail Online and its print counterpart The Daily Mail have regularly shown they are prepared to go down the deliberately divisive path Hopkins was signposting. But even if the site's managing editor Martin Clarke was secretly a liberal sandal-wearer, there are also very good economic reasons for Mail Online to stick with her. The extreme and outrageous is great at gaining attention, and attention is what makes money for Mail Online.

It is ironic that Hopkins’s career was initially helped by TV’s attempts to provide balance. Producers could rely on her to provide a counterweight to even the most committed and rational bleeding-heart liberal.

As Patrick Smith, a former media specialist who is currently a senior reporter at BuzzFeed News points out: “It’s very difficult for producers who are legally bound to be balanced, they will sometimes literally have lawyers in the room.”

“That in a way is why some people who are skirting very close or beyond the bounds of taste and decency get on air.”

But while TV may have made Hopkins, it is online where her extreme views perform best.  As digital publishers have learned, the best way to get the shares, clicks and page views that make them money is to provoke an emotional response. And there are few things as good at provoking an emotional response as extreme and outrageous political views.

And in many ways it doesn’t matter whether that response is negative or positive. Those who complain about what Hopkins says are also the ones who draw attention to it – many will read what she writes in order to know exactly why they should hate her.

Of course using outrageous views as a sales tactic is not confined to the web – The Daily Mail prints columns by Sarah Vine for a reason - but the risks of pushing the boundaries of taste and decency are greater in a linear, analogue world. Cancelling a newspaper subscription or changing radio station is a simpler and often longer-lasting act than pledging to never click on a tempting link on Twitter or Facebook. LBC may have had far more to lose from sticking with Hopkins than Mail Online does, and much less to gain. Someone prepared to say what Hopkins says will not be out of work for long. 

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