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The anatomy of a political lie: ‘tax-free childcare’

18 March 2014

Today’s announcement of childcare subsidy, up to the value of £2,000 per kid under the age of 12, is welcome news. As The Spectator argued last week, this is perhaps the smartest single move the Chancellor can make – too many highly-skilled women want to work, but cant afford to as they’d face Europe’s highest childcare fees. And then the Treasury has to spoil it all by lying about the policy. The government website has this to say:

Screen Shot 2014-03-18 at 11.37.17

The first thing parents need to know is that the scheme is not ‘tax-free childcare’ at all. So how on earth does the Treasury justify claiming otherwise? Its explanation is below:-

‘For every 80p you or someone else pays in, the government will top up an extra 20p This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year.’

So for ‘most people’ the payment (and it is a payment, not a tax refund) will be the same as the income tax they pay. But this is not the same as making it tax free. For a start, it doesn’t refund the other taxes on wages: employers NI, the NI paid by workers directly. Nor will it exempt the parent from paying the taxes for hiring the nanny, which can work out a third of their wage. And you can receive the cash even if you don’t pay income tax at all.

And if you’re one of the 4.5 million dragged into paying income tax at a higher rate than 20p in the pound, this policy will offer nothing resembling tax-free childcare.

Also, note the slippery use of language ‘which gives the scheme its name’ – as if this was  a baptism ceremony and it decided to call this policy ‘Tax-Free Childcare’ rather than ‘George’ or ‘Michelle’. Could RBS describe a service as “free” if it intended to charge a million or so of those who used it? Screen Shot 2014-03-18 at 11.38.50Sure, some companies do use some artistic license when selling their products – but you can’t stretch the truth when selling financial products in Britain. Not any more. Only in government do such distortions remain.
Peter Oborne wrote a very good book about these kind of lies. And I use the word advisedly: either a policy is tax-free, or it isn’t. It’s a binary divide. To claim it is, when it’s not, is a lie rather than an exaggeration. The millions hauled into paying the 40p rate will not be given tax-free childcare – but the government wants to mislead them into thinking otherwise before election day. No10 has even made the lie into a Twitter hashtag:-

Claim your gift

Screen Shot 2014-03-18 at 12.02.00

Now, this matters because the government imposes tight regulations on the financial services industry. If a bank sold a policy as being ‘tax free’ when it wasn’t, they’d be guilty of misselling and they’d be prosecuted by the Financial Conduct Authority – and rightly. If tomorrow’s press refers to this ‘tax free childcare’ then you can file an online complaint to the Press Complaints Commission under the accuracy clause. They’d find in your favour. If a supermarket advertised ‘tax free childcare’ and it wasn’t tax free, they’d be done by the Advertising Standards Agency for telling porkies.

But if the Tories put up a mendacious poster, and you called up the ASA to complain, you’d be told: sorry, they don’t apply their rules to politicians:

‘For reasons of freedom of speech, we do not have remit over non-broadcast ads where the purpose of the ad is to persuade voters in a local, national or international electoral referendum. Complaints about political advertising should be made directly to the party responsible for that advertising.’

And good luck to you complaining ‘to the party responsible’ about a political porkie. I called HM Treasury earlier on, and asked how they justified using misleading language that they’d prosecute banks for. The response? ‘That’s an interesting observation’. No more.

And I can see it from their perspective: who’s going to complain about little lies like this? Sure, they’ll get some hassle from a few lowlife bloggers. But will the broadcasters pick up such a relatively small point? Will the newspapers? It’s pretty unlikely.

This is a small example of the culture of political lying which grew in the Labour era, and has never quite buried by the Tories. The decision by the Statistics Authority to chastise politicians who abuse statistics is a step forward. But no one will admonish ministers for a non-statistical attempt to mislead voters – in this case, the 4.4 million who pay the 40p tax rate.

Now, I’m not saying this is a big issue – it’s a relatively small one, it’s just everyday spin. And, again, this is a good policy – probably the best thing George Osborne will do all year. But it has been sold using mendacious spin, the spin that would not be tolerated in any other industry in Britain.  It’s time that our ministers complied to the standard of accuracy that they so piously set for others.

UPDATE The below government infographic further explains shows how the system works. Notice how the phrase ‘tax free’ is dropped inexplicably into the middle. You pay in £4, the state (i.e., the taxpayer) contributes £1 – even if you don’t pay tax.



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Show comments
  • Chris Gray

    I’m still not sure about any of this. Income tax has come a long way since the “temporary measure” that was introduced 200 years ago to pay for “the wars against Napolean”. I’ve just read another interesting article, which states that “the standard rate of income tax 100 years ago was only 6%” [] Oh well! One can dream!

  • Steve Smith

    For all of the ‘good news’ in this there is some ‘bad news’ that is being glossed over i.e. for those companies and their employees already providing the existing Employer Supported Childcare scheme. These companies will have to close down with thousands being made unemployed and shareholders losing their investments.

    William Hague bemoans a land grab in the Crimea… well that is what has happened here because with the swipe of a pen and a cheery tweet the Tories have taken over a whole multi-million pound industry and given it to themselves.

    All hail Czar Cameron.

  • JonBW

    It is not ‘good news’ for parents; it is ‘good news’ for parents who pay for childcare.

    For those of us who don’t, and who already make sacrifices because we believe it’s right, it’s another example of the contempt in which we are held by the elite.

  • Robert_Eve

    The State should butt out – if women want to work then they should do the maths.

  • Mr Grumpy

    I am a reasonably highly-skilled person who would like to employ a chauffeur but can’t afford to because they’re, like, really expensive. When do I get my subsidy, please?

  • FrancisHorner

    Can someone explain what the Conservative party has got against single earner families. Measure after measure actively discriminates against them to the tune of thousands of pounds per year (far far more than the proposed married couple allowance would benefit them). The existing childcare voucher system is one of the few provisions not to specifically exclude them and now that is to be abolished.

    Certainly a logical (if unpopular) case can be made for abolishing all childcare tax relief, but this continual discrimination against one particular group is bizarre coming from the party that claims to support the family.

    • Makroon

      Spoken like a genuine envious class-warrior.
      Single-earner families are not damaged, what is this ridiculous “discrimination” you speak of ? Are you another professional “victim” ?
      Modern Britain – even the right-wing are busily scrabbling to ensure they get their share of state hand-outs.

      • Magnolia

        Single income families pay about one months salary extra in tax and NI compared to a dual wage family on the same income.
        This works for poorer families as well as the richer ones.
        They will disproportionately be the ones to lose child benefit as well as the personal allowance at the ‘very top’ rates.
        Single income couple families probably do not need child care but the single wage earner will pay for it as well as support the adult who performs it, so in a single income family the one wage is often supporting at least three people but family tax overall is far higher.
        Nothing to do with class just pi*s poor tax policy.

  • Rhoda Klapp8

    Still waiting to hear what makes other peoples’ childcare and career choices my problem to pay for.

    • Kitty MLB

      Are their parents also not taxpayers, and helping to grow the economy? I can understand the annoyance
      paying for those who sit around on benefits, why should they be the only ones to get a little help.

      • Rhoda Klapp8

        They wouldn’t need help if the govt wasn’t stomping all over childcare with its big stupid regulation-writing enterprise-sapping boots on.

  • the viceroy’s gin

    Well, I suppose we should give credit where it’s due, lad. You’re still a socialist, but at least you can’t be described today as a lying socialist, at least not over this policy. That represents progress for you Speccie teenagers, sad to say.

  • BarkingAtTreehuggers

    Whatever Osborne announces as headline policy tomorrow, the diametrical opposite is true.

  • Matt Tomlinson

    Actually there’s another bigger catch. If the email I got from from HMRC is to be believed, Employer Supported Childcare (whereby you could take up to £55/week tax free either direct from your employer or as salary sacrifice) is effectively ending as a result (you can’t claim both and you lose it if you change jobs after 2015) . Now I haven’t worked out the sums, but I think a lot of light users of childcare could actually be worse off as a result, not to mention those who used it to pay for private school fees (up to 18, not just 12 in the current scheme). Also, look at the mechanism – so I have to pay into a (presumably non-interest bearing) National Savings account to then pay nursery fees? WTF? That sounds like a PITA for all concerned. I do hope that this helps the majority because there are going to be a lot of parents deprived of a helpful tax-perk.

  • Frank

    Well done Fraser, you seem to be learning, they lie all the time!
    Secondly, why waste time since this will no doubt be torn to shreds at the next General Election.

  • Marc de Salis

    Surely the 20% is the VAT on the service, rather than income tax?

    • HookesLaw

      I don’t think provision of childcare is subject to VAT. The broad point is that the changes (improvements to a previously announced policy) effectivly make childcare tax free for most people.
      The other broad point is that it is in our interest to promote, or to put it this way, to not put barriers in the way of, couples having children.
      Children are good for us. The State is right to promote families and children. We do not want to become an aging population like say Russia.

      • Marc de Salis

        Ah okay, thanks

  • Daniel Maris

    This will become another financial scam for certain sections of our community where childcare is only ever done by the mum.

  • Smithersjones2013

    Oh dear Osborne is pandering to the upper classes again. So called professionals who collectively earn £300,000 a year can dump their kids in childcare and get an extra tax break from this government for doing so whereas struggling lower class families where only one parent is working because they put their children’s welfare before greed are excluded. Remote out of touch and don’t give a damn. That’s the modernised Tory Party for you….

    Once upon the time the Tory party was the party of the family. Now it is the party of the upper class urban liberal elite.

    This policy has the whiff of Brown’s abolition of the 10p tax rate. There is something decidedly off about it.

    • HookesLaw

      ‘upper’ classes
      ‘so called’ professionals.
      How could you ever live without your thick bigotry.

      What a pathetic load of dross you spout.

      • Jen The Blue

        Why should people without children subsidise the lifestyles of those who choose to have them?

        • Fergus Pickering

          Because having children is a good thing and not having them is what selfish drones do. I take it you are a selfish drone.

          • Geronimo von Huxley

            Man, since when do you need to encourage having kids man??? Angelina Julie ain’t got no kids man, Mad Donna ain’t got no kids… they buy them man!!! When your short of kids man don’t give birth man that worse than smoking man just buy a Thai or whatever like a take away man!!!! Insane!!!

            • Kitty MLB

              Oh God, Its the Yankee again, I have begged you time and time again stop continuously using the word MAN in every
              I lament how some across the Atlantic have anathematized
              my language, which you would call ‘American Slang’.
              We are English, treat our ears and eyes with some kindness,
              its just too much it really is Mr Red Indian-
              might I add we were quite civilized when you were playing
              with bows and arrows.
              By the way, Angelina Jolie has children she has given
              birth to and some ADOPTED children.

            • James Strong

              Why can’t the moderator do something about this drivel?
              I don’t advocate censorship, but send to Geronimo’s email address details of a course in how to write English.
              Dude, you could really benefit man.
              And so could your readers.

          • Nicholas chuzzlewit

            I think you need to expand on that just a little and explain why having children is a good thing. Otherwise, your argument sounds like “i chose to have children so it must be great. You chose not to have children so you must be selfish”.

          • James Strong

            By your definition I am a selfish drone.
            Why is my decision not to have children selfish?
            Who loses out by it?
            And what has it got to do with anybody else?
            And don’t come up with any guff about what might happen if everybody took the same decision as me.
            There is enough variety of individual decisions to make that guff a non-starter.

            • Fergus Pickering

              Yes sir, you are a selfish drone and when you are gone you will leave not a wrack behind. You might as well have never been.

            • Fergus Pickering

              Naw, James, I just said it to ginger things up. You do as you lie. I feel the same way about gay marriage. Everyone should do as he likes if it doesn’t frighten the horses. Besides, you might be fashioning great works of art in your spare time, and then I’d look pretty stupid. Henry James didn’t have any children

          • Jen The Blue

            No, you make false assumptions however by your attitude I can tell you are a fairly unpleasant troll. Some people are alas unable to have children, but whether I have any or not, I don’t see why anyone else should subsidise them.

            It certainly isn’t clear that having children is necessarily just a good thing either. Yes there are problems with an aging society at the moment, but this is also an overcrowded country. Further it is one in which those in the upper age brackets have mortgaged their children’s futures by overborrowing.

            I believe we should all be responsible for our own decisions and lives. I don’t work for your children.

            • Fergus Pickering

              If you are unable to have children, that is your misfortune. If you do not have them by choice then pay your taxes.

              • the viceroy’s gin

                …yes, you’re a pure socialist alright.

                • Fergus Pickering

                  Is there anyone who ISN’T a socialist and still alive, except you, ld fellow? Come on, name names.

  • Rockin Ron

    Message to all politicians. Whatever you spin will eventually unravel.

  • HookesLaw

    ‘Now I am not saying this is a big issue’ — so why bother with this absurdly long article. The big issue is the danger posed to this country by the Labour Party. Heaven forbid you or The Spectator should concentrate on that.

    • southerner

      Even when it’s not a party political point you seek to make it so. Can’t you just condemn all politicians for the lies they so frequently tell?

    • Makroon

      You know Fraser – he can be amazingly tolerant and respectful to lying goons like Balls ‘n Blower, but likes to nit-pick coalition policy.

      • the viceroy’s gin

        …you think you Camerluvvie goons’ lying is better somehow than anybody else’s, lad?

  • peteswordz

    “And, again, this is a great policy – probably the best thing George Osborne will do all year.”
    Keryst! And he’s bitchin about government spin
    So those who benefit are those who bring up their kids with the aid of a foreign nanny.
    And remind me who those people are?
    From where the rest of us poor plebs are standing, go **** yourself.

    • HookesLaw

      Spoken like a typical Spectator thicko.

      • Kitty MLB

        Hookey, I smell the noisome vapours of someone who belongs
        within the new statesman. he / she is not a Spectator thicko
        but a stinky leftie belonging elsewhere.

  • Magnolia

    Good article even though I disagree completely that state subsidised child care is a good thing.
    They tried the same thing with the personal allowance rise which was initially going to benefit every tax payer but which now has been toned down to benefit all but those at the very top (earning over £100,000).
    We are in deficit/debt country again and it stinks.

  • Hello

    That’s an interesting observation.

  • London Calling

    Yes indeed Fraser………who ate all the pok pies………..:O

    • London Calling

      {Pork Pies}………yummy mummies…:)

  • MrVeryAngry

    The other ‘lie’ is that the “….government will top up an extra 20p…“. It won’t. It can’t. The government has no money to do this. All the governemnt can do is to collect tax from one bunch of people and give it to another bunch of people. So it’s ‘other taxpayers topping up [your] childcare by 20p’. Tossers.

    • Mr Grumpy

      Including those taxpayers whose children are cared for by the other parent and who will therefore get nothing.

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