News

**MSE Wendy** · 04-09-2009, 4:00 PM

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's Meeting the Minister to talk Tax Credits & Childcare Vouchers black hole Blog.

Click reply to discuss below.

Errata · 04-09-2009, 5:47 PM

Best of luck. A general election will be held in a few months time and the likelihood of Labour being returned to power is vanishingly small.
Tax Credits are the personal invention of Brown and his brain (Balls). Any significant change would indicate that Brown got it very wrong indeed. Brown doesn't do 'oops I was wrong'.
A new government may have a very different approach to the present one. Now would be the time to start discussions with it.

Peter5415 · 09-09-2009, 8:38 AM

Well done for trying, Martin. However, all that effort for the government to consider adding an extra sentence of guidance on a form seems like a poor outcome - especially as they might decide even that is too much trouble.

Using the excuse that's it too difficult/expensive to remove an utterly rubbish system and come up with a better one is, frankly, not good enough. I know - that's an unrealistic and naive opinion. However, this 'patch up and carry on' approach is precisely why tax law is so unnecessarily complex. If the minister won't even entertain the idea of making things better, what on earth is he doing in politics? (And no, I don't think he's just feathering his nest, before someone even more cynical than me posts that suggestion.)

Would it have been so complex to junk the voucher scheme and make childcare a tax deductible expense? Tax deductible expenses are hardly new and untried - all it would take is an extra explanatory sentence on the tax return.

Could the change not be funded by the money currently going to the companies running the voucher scheme? What value do they actually add? They inexpertly guide the public around an overly complicated scheme, sometimes giving out duff information along the way while absorbing a load of money. (Incidentally, does anyone know whether the government pays them or whether it comes from employers?)

Bottom line - disappointed but not even slightly surprised.

spend2save · 09-09-2009, 11:02 AM

Why did you waste your time talking to the present government who are clearly more concerned about looking for their next job? Better to get in early and influence the next lot.

The tax credit is totally unfit for purpose. It penalises workers who succeed in getting promotions or pay rises by clawing back 37% + Tax +NI (70%) of any increase - thus taking away the reward motive of employers to give raises to staff - which just ensures that the lower paid get progressively worse off. Note how the minimum wage is becoming the typical wage for many more jobs, with many million on wages now within a £1 or 2 per hour.

Also, the tax credits system is an open invite to abuse by the better off. For example, a worker who is willing to put their entire wages into a pension will, in effect, get an instant 247% gain on their pension contribution. Every £1000 of Gross Pay put into a pension results in a take home decrease of just £288 with tax credits rising to compensate for lower earnings. Of course poorer workers need every penny of net pay that they can muster - whilst middle earners can sacrifice 100% of earnings if they so wish. Yet another subsidy for the rich paid for by the poor.

I am personally taking full advantage of this and sacrificing 100% of my earnings. The system needs abusing to death.

Mum_of_3 · 09-09-2009, 11:25 AM

What about those of us that are self-employed and earn too much for childcare benefit?

If we were employed & earning too much we could take the £60/wk tax free towards the childcare, but if you are self-employed there are no such perks!

In fact the whole WTC system seems to work at odds with the self-assessment system!

Rant over!

M_o_3

RKE Mam · 09-09-2009, 1:38 PM

May I start by saying that my husband & I are not stupid, we are both graduates and work in what are classified as "Professional" positions. We fell foul of the overpayment system several years ago, caused by a performance related bonus system element of our pay. We paid this back and since have not recieved a penny in credits, but have kept all renewal forms up to date.
Our son was born in March, at which time his birth was registered and child benefit office informed, all the things you are told to do when a child is born. Not once was I reminded to tell child tax credit people. When the renewal form landed I realised that obviously the Government offices haven't spoken to each other and our son wasn't on the form. I rang up to tell them of the new arrival to find they can only go back 3 months to add a child to the register. In our case this means missing 7 weeks of eligibility, but it could have been 9 months. This is annoying as they seem to be able to go back years if you owe them!
I'll probably owe them now anyway, until reading your meeting notes I hadn't realised that paying with vouchers affected my childcare payments. I told them what I pay, not how I pay it.

threedogs · 09-09-2009, 3:51 PM

This isnt about childcare vouchers but another annoyance at the tax credit system. My 17 year old daughter received her AS results this Aug (20th). She didnt get the results she wanted and decided not to go back to school when they started back on the 3rd Sept. She started at a part time job a week later. I thought I had better tell tax credits that she was no longer in further education. When I rang up they told me that payments would cease from the date of her last exam in June. I think this is really unfair as she didnt know until the results came out what she would do. I pointed out that we have had to support her all summer. If she had been going back, or indeed had been a year older and going off to uni in the Autumn I would have received them until 31st August. Child Benefit are paying me until 7th Sept so why not tax credits? Had we have had a crystal ball and known she wouldnt return in Sept, we would have made sure she had attempted to line work up earlier. Grrrrrr

**MSE Wendy** · 09-09-2009, 3:56 PM

Quote:

Originally Posted by Peter5415

Well done for trying, Martin. However, all that effort for the government to consider adding an extra sentence of guidance on a form seems like a poor outcome - especially as they might decide even that is too much trouble.

I don't think it's a poor outcome Peter. Anything that can warn people of the potential issue - and sometimes the simpler options are the best - can only be a good thing.

The comment from RKE Mam above - "I hadn't realised that paying with vouchers affected my childcare payments. I told them what I pay, not how I pay it." is exactly the reason people need to be informed.

Viking Man · 09-09-2009, 9:25 PM

Obviously it is better to tell people of the idiosyncraces of the tax credit system but should you not have been forceful in challenging the assertion that to fix the problem would be "too expensive". Here you have a lunatic situation literally invented pure bureaucracy. Armies of of Oxbridge educated economists in the treasury, and they can't even sort out how to finance childcare in this country despite the fact that other countries have been doing so perfectly well long before the UK ever began to get its act together. An typically British attempt to compromise between tax credits and childcare vouchers has created the usual unintended consequences and now the government can't be bothered to repair the problem that it created? It's just nonsense.

**MSE Martin** · 09-09-2009, 9:37 PM

Quote:

Originally Posted by Viking Man

Obviously it is better to tell people of the idiosyncraces of the tax credit system but should you not have been forceful in challenging the assertion that to fix the problem would be "too expensive". Here you have a lunatic situation literally invented pure bureaucracy. Armies of of Oxbridge educated economists in the treasury, and they can't even sort out how to finance childcare in this country despite the fact that other countries have been doing so perfectly well long before the UK ever began to get its act together. An typically British attempt to compromise between tax credits and childcare vouchers has created the usual unintended consequences and now the government can't be bothered to repair the problem that it created? It's just nonsense.

Government policy doesn't change that easily - and frankly this is an issue which has limited public interest - and is too complex to get widespread support. I've not seen it written about or covered anywhere - and whenever I've mentioned it have found it difficult to raise any interest within the media or other outlets.

Even on this website while a key issue amongst certain groups the traffic and interest is lower than other issues. This is a big issue for those it impacts only Im afraid.

As such Im a pragmatist - of course I could've spent my alloted time with the minister berating them for their failing and saying it should be changed. And then I'd have walked out and nothing would have happened.

Sometimes you have to be practical and achieve iterative rather than revolutionary change. As I said in the blog I made it clear we hoped for more but focused on what could be achieved.

Martin

Errata · 09-09-2009, 9:50 PM

Quote:

Even on this website while a key issue amongst certain groups the traffic and interest is lower than other issues. This is a big issue for those it impacts only Im afraid.

This applies to a great many policy issues, unfortunately. A current example is the green paper on changes to funding care - something I've been involved in from the beginning but which appears to generate a vanishingly small amount of interest, despite the numerous threads that have been started on various boards.
It's a bit like chiropodists: nobody is interested in where the nearest one is until the day they need it.

Hope68 · 10-09-2009, 7:47 AM

...I was told I couldn't claim both tax credit (childcare element) and use salary sacrifice scheme. My situation was complicated by my separation and of course my mind was all over the place. I've gone back to check sums and it looks like I should have (could have) claimed £2500 in credits compared to 'saving' £900 thru the vouchers. Argh! Now both my kids are at school.

carolan78 · 10-09-2009, 1:14 PM

I have just used their calculator and we would be better off using the voucher scheme if we got one voucher for £50 per week but it would take my husbands pay under the minimum wage it said. Does anyone know if this would be a problem for his company as they won't be able to give him a payrise.

Ama · 11-09-2009, 8:57 PM

Quote:

Originally Posted by carolan78

I have just used their calculator and we would be better off using the voucher scheme if we got one voucher for £50 per week but it would take my husbands pay under the minimum wage it said. Does anyone know if this would be a problem for his company as they won't be able to give him a payrise.

Your husband's pay cannot go below the minimum wage. It would be illegal should that happen. If his pay is that low, then you should really be claiming tax credits as higher rate tax payers are amongst the groups who benefit the most from salary sacrifice.

carolan78 · 12-09-2009, 9:51 AM

According to their calculator I would get more tax credits with the pay drop so to speak, but it would take him under the minimum wage threshold. I find it highly stupid they have a system in place that those on the lowest wages can not take advantage of.

Fingers crossed the company will get the go ahead to promote him next week any way so his new rate of pay will allow us to claim the vouchers and have the same income as we are on now if it works out beneficial to us. I think it would help us because our childcare costs are over the £300 a week limit they take into account. Might be worth some other low earners in this situation double checking the figures if they are in the same situation