"Ed Balls' reply to my Childcare agitation. Suggestions needed." blog discussion

micky_101

As a full time student who's partner works full time, I need childcare but am not entitled to any help with the costs. The help avaialable to students needs seriously looking at. I am entitled to a full maintenance grant to help with basic living costs whilst I'm a student, so clearly student finance recognises that the family has a low income, however tax credits take no account of one parent being a student - both have to be working a minimum of 16 hours top qualify for help with childcare. Sadly if the cost of childcare becomes too difficult to manage I may have to give up my course and then be stuck at home as an unemployed person .

Monkeylady_2

Thankyou for taking this up Martin! I started claiming tax credits last year when my baby was born and it was a complete nightmare! I only found out 6 months later that I was entitled to more as it was worked out on last year's income, which was considerably higher than the maternity pay I was then receiving. As for childcare I've still been unable to work out if we would be better off with vouchers or tax credits. For the time being I'm sticking with the vouchers as it's just easier than faffing any more!!

I don't understand why it has to be so complicated. Obviously everyone's situation is different but thresholds of income vs. tax credit eligibilty would be really helpful!!!

samandmillie

Interesting article. Is there an easy way to find out whether I would be better off if I opted out of the current childcare voucher scheme that I take part in?
Thanks

PPO

It's insanity we simply need to make it automatic, not paperwork, which costs more to administer than they pay out. If you turn up with your child that's evidence that you need childcare surely.
Funny how we managed it in the war when we worked every able bodied mother for the war effort.

ThinkingOfLinking

PPO wrote: »

It's insanity we simply need to make it automatic, not paperwork, which costs more to administer than they pay out. If you turn up with your child that's evidence that you need childcare surely.
Funny how we managed it in the war when we worked every able bodied mother for the war effort.

While I agree it should be automatic; after all, I got sent a National Insurance card around the time of my 16th birthday without requesting one, there would be some effort involved as they'd need to check the child hadn't died, or moved abroad, or been taken into care, or hospitalised, etc as this would affect the benefit rate. And of course, some people would just borrow someone's child, take them in and pretend it is their own offspring, so it would have to be more than that.

Peter5415

As others have already pointed out, the complexity is probably the entire problem.

Considering child tax credits first - this is run by HMRC, but from a department which acts as though it is entirely ignorant of the HMRC which deals with taxation. More or less all of the information involved in running tax credits is already supplied by parents when completing tax returns and yet we are asked to complete another form asking much the same questions but in subtly different ways.

To my mind, there is no reason why HMRC couldn't calculate tax credit entitlement directly from income tax returns since the government clearly knows who has which children in order to run the child trust fund scheme. Whether the administrative saving would even out with the increase in monies paid out is something I am unable to calculate but it strikes me as a morally dubious approach to offer benefits but only to those who both find out about them and have the ability (and energy) to apply for them.

Maybe this is naive and, if all parents claimed everything they were entitled to, then the system would go bankrupt - in which case we should be told openly that the costs are being kept down by discouraging potential claimants by the weapon of unnecessary bureaucracy.

Secondly, considering childcare vouchers, this might sound like a stupid suggestion but is there any reason why parents could not claim £243 per month from their gross salary through their annual tax return? The tax advantage could then be sorted out through the tax code in the same way as countless other items which can be paid for from gross salary (e.g. membership of professional organisations, mandatory insurance schemes, etc).

This would remove the unnecessary bureaucracy of childcare voucher companies - do they really add anything except an ability to extract some money for themselves? Additionally it would clear up the strange side effects of taking childcare vouchers, e.g. risks of receiving reduced maternity pay, smaller apparent income when being considered for a mortgage, etc.

There would, no doubt, be abuse of this scheme but I assume there is also abuse of the tax breaks for professional memberships, the tax breaks for company cars, etc, etc. However this could be solved by HMRC requesting the production of receipts, as with other expenditure. Again, a tremendous increase in efficiency.

By making the 'voucher' scheme an adjustment in tax code and arranging for tax credits to be calculated automatically with information that HMRC already has, it would be impossible for anyone to be made worse off unless the government decided to place traps into the scheme.

I confess I have a personal hatred of the implementation of both of these schemes. While the government clearly had its heart in the right place, I do wonder whether the mechanisms were set up in this way to dissuade some from applying. Personally, we lost out on several months of child tax credit because we didn't realise we were eligible - the information was in a pack which our health visitor failed to give us at the birth of our child. When we finally found out about it, HMRC refused to backdate more than three months because those were the rules, which I considered mean-spirited to say the least.

We additionally lost out on a few months tax advantage from childcare vouchers because our forms were lost in the post. Since the employer/voucher provider were excruciatingly slow in processing anything it took us a while to realise what was going on and start the whole business again. Interestingly, we have a new employer now but the old one continued happily paying £243 per month to the voucher provider, despite the fact that there was no salary to take it from. We asked them to stop as soon as we became aware but it shows how unnecessarily fiddly the whole business has become.

Former_MSE_Wendy

samandmillie wrote: »

Interesting article. Is there an easy way to find out whether I would be better off if I opted out of the current childcare voucher scheme that I take part in?
Thanks

http://www.hmrc.gov.uk/calcs/ccin.htm this might help samandmillie. It's a HMRC 'Childcare Indicator' calculator. Whilst unlikey to be 100% correct it should be able to give more of an idea on whether vouchers or credits are better for you.

UnCS

What do you think is a realistic outcome from this meeting?
is it
a) action to address the need for people using vouchers to understand the implications for tax credits
b) agreement to a specific policy change or
c) agreement by the minister that this is an unintended consequence of the policy and agreement to look for a solution?

I'd suggest concentrating on a) and c) rather than advocating a particular solution. This will be easier to achieve in one meeting and leave the door open for continuing discussion with the department about the issue. If the minister cannot agree that this is not what was intended then they are not going to make any changes anyway. in these circumstances it would be better to concentrate on getting agreement to improve awareness amongst tax credit applicants and have a discussion about change of policy with an opposition party. Probably worth doing this anyway - and being open about your intentions to do so.

hossa25

Hi Martin

I consider myself to be pretty ok when it comes to understanding money issues, but the childcare tax credits scheme has me baffled.

All I do is ring them when anything changes & whenever I get documentation and have them talk me through what they need to know from me as I can't face their paperwork, or understand their calculations, my money then goes up & down in a way that is a bit of a mystery.

My thought is that I think the companies providing childcare vouchers need to be made to take more responsibility somehow when you sign up to their scheme - when I signed up for vouchers I don't recall any mention of the impact this might have on tax credits, certainly no one talked me through the pros/cons, so now I have no clue whether I should carry on with them or not.

The first I realised was when I called tax credits recently (upon getting renewal pack) to tell them I was paying for childcare, but when I said it was using vouchers they just said they weren't interested as I was already getting benefit from vouchers, so they weren't listed on my records (other than as a lower income generally). That was when I realised I could have paid normally and maybe got more relief from tax credits. But left with no clue on how to easily find that out!

Very confusing! Anyway, hope this meeting goes well!

Debbie

funkidyllic

I appreciate all your efforts with the government and agree with what you are proposing.

Having children and limited income make life hard enough without wading through tax credit and voucher systems.

Above all, benefits should be widely publicized and clear to those who need them.

In addition, surely it is not above the wit of government to provide an easy reckoner on a web site so we could work it out for ourselves?