Saturday 14 May 2011

Nice bit of Indian Bicycle Marketing

Zoe Williams, kicks off an article on Comment is Free titled "The reason mothers work – and Tories try to stop them" with this bald claim:

Benefit cuts, childcare costs and marriage tax breaks are forcing families back into a single breadwinner model"

1. None of her assertions or inferences are true (to any great extent), but you must always remember that the behaviour of the three big UK parties is summed up in the book 1984:

2. Under this lies a fact never mentioned aloud, but tacitly understood and acted upon: namely, that the conditions of life in all three super-states are very much the same... It follows that the three super-states not only cannot conquer one another, but would gain no advantage by doing so. On the contrary, so long as they remain in conflict they prop one another up, like three sheaves of corn. And, as usual, the ruling groups of all three powers are simultaneously aware and unaware of what they are doing.

3. To wit, if a stereotypical Tory voter reads that article, he will think "Hurray! Stick it to those benefit scrounging cheats! A mother's place is in the home and so bring on those marriage tax breaks!" and a stereotypical Labour voter or feminist will think "Boo! Those nasty Tories are slashing benefits, preventing mothers from going to work and imposing their patriarchal view on society!". A Lib Dem voter probably muddles his way between the two.

4. So, that first sentence reinforces whatever prejudices people had anyway, and makes them more likely to vote for whichever party they were going to vote for anyway. The interesting bit is why the Tory government doesn't point out that these claims are not true; benefit rates have not been reduced, the Tories have merely tinkered at the edges a bit; childcare costs are dictated by childcare providers, not the government; and there is not, as yet, an actual tax break for marriage (unless I missed that memo?)

5. The answer is, there would be no advantage to the Tories of doing so; no stereotypical Labour voter is going to vote for them anyway, and if they admitted that welfare policies have developed piecemeal under both Labour and Tory governments without any big swings in either direction, then they'd lose the support of the stereotypical Tory voters.
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When you read the article, the only example of benefit cuts she can actually point out is that the childcare element of Working Tax Credits now only covers 70% and not 80% of eligible childcare costs, which is true. However, this does not mean that people have to pay 30% rather than 20% of childcare costs - which would be a fifty per cent increase - it is far less dramatic than that:

a) You couldn't claim for 80% of the full amount anyway, the amount for which you can claim is capped at £175 a week for one child and £300 a week for two or more children. You had to pay the rest yourself.

b) For children aged three to five, there is a much better system, a leftover from the Tory government of the 1990s, called Early Years Funding. If you send your child to nursery, the council just gives you a voucher/part payment of 15 hours x about £4 a week, i.e. £60; non-means tested, non-contributory, sorted. Remember: the Tories increased this from 12.5 hours to 15 hours last September, so that's an extra £10 a week for millions of parents.

c) The eligible amount from (a) was reduced by the amount of EYF you got anyway, you only were entitled to claim 80% of the net amount.

d) The fact that you can claim for 80% or 70% of something does not mean that you will get it; the childcare element of Working Tax Credits is reduced by 41 pence for every £1 that either parent earns (this used to be 39 pence, long story) above a certain threshold. So if the two parents earn e.g.£22,000 between them a year, they lose £6,388 a year of their tax credits, i.e. £123 a week.

e) So let's assume that these two parents have two children at nursery and one is aged three to five, and it costs them £350 a week. They can only claim for £300 minus 1 x £60 EYF = £240 a week, their maximum entitlement is £240 x 70% = £168, and they lose £123 of this, see (d), so they get £45 tax credits plus £60 EYF = £105.

f) Using 80% and 12.5 hours EYF, they would claim for £300 - £50 = £250 x 80% = £200, reduced by £123 = £77, plus £50 EYF = £127.

g) So their net nursery costs have gone up from £223 to £245, which is only a ten per cent increase, and not the fifty per cent increase which the article suggests.

9 comments:

Macheath said...

Re 3; I am reminded of James Thurber's mock problem page, featuring a drawing of several cats and a letter:

"Dear Sir,
We have cats the way some people have mice"


which received the answer

"So I see. However, I cannot tell from your communication whether you are seeking advice or just boasting."

Mark Wadsworth said...

McH, yes, that's the same principle.

Tim Almond said...

In fact, the Tories change to Working Tax Credits actually encouraged women to go to work by setting the maximum allowable as per earner.

Earn £80K and you don't get the credit. 2 of you earn £40K and you get the credit. That's an incentive for husband to give up his city job and work locally and for his wife to get something that rewards similarly.

Mark Wadsworth said...

JT, don't you mean Child Benefit?

And of course the Tories want both parents to work - it's good for house prices, that goes without saying.

Anonymous said...

The Tories have actually significantly cut Child Tax Credit as well as Working Tax Credit. The cutoff point where it starts tapering was reduced from 50K to 40K or something.

They've also announced that fatuous Child Benefit thing as well of course (where you tick the box if you're a higher rate taxpayer and they take all the benefit away). That comes in in 2013.

Mark Wadsworth said...

AC, don't you mean "The cutoff point where it stops tapering"? in other words, if you earn £40k, you now get nothing (but you are 'only' losing a few hundred quid, I think.

Anonymous said...

No, if I've understood it right it is the point at which the basic family element starts tapering.

Where the child elements stop tapering depends how many children you have (because it is the overall amount i.e. the sum of your child elements for each child that tapers).

Mark Wadsworth said...

AC, I stand corrected. For £50,000 read £40,000:

WTC and CTC are designed to be a seamless allowance that steadily reduces as family income rises.

If they are claimed together, both combine to form the basic award. This combined award is subject to withdrawal from the point at which WTC entitlement would have been zero (called the First threshold for those entitled to Child Tax Credit only). In 2009/10 this threshold was £16,040.

However, unlike WTC, CTC does not continue to reduce to zero. After this first threshold is reached it remains fixed until the household reaches a second income threshold (£50,000 in 2009/10). Thereafter it reduces again at a rate of £1 for every £15 of income.

Recipient households of combined WTC/CTC awards thus fall into three categories

i. those on a 'main-rate' reduction of 70 percent (i.e. marginal tax + 39%) receiving > £545pa
ii. those on an income of up to £50,000 in receipt of the small flat rate family element (i.e. marginal tax only) receiving £545pa
iii. those with incomes between £50,000 and £58,170 (i.e. marginal tax + 6.67%) receiving <£545pa


Pretty blindingly obvious, once you stop to think about it. For a few hours.

Anonymous said...

The tax credit system really is a complete nightmare. For what it's worth, even that Wikipedia description was not quite correct. I have now corrected it! :)