6 |
Take up Rate: The Revenue website (via its link to National Statistics) carries take up rates but so far the figures relate only to the last days of WFTC. |
Income of family or individuals? The basing of the new credits on household income is quite correct in terms of targeting but means that the advantages of keeping one’s tax affairs secret from one’s partner, not to mention the freedom to go out and work knowing that one’s marginal rate of tax will not depend on one’s partner’s income, have now gone not only for spouses but for any situation in which there is a relevant partnership. |
Effect on Child care costs—Lee (at p 15) cites a report from the Daycare Trust that British child care costs, with an average nursery place for a child of two costing 120 per week, represents a rise from the previous year of more than four times the rate of inflation as well as being the highest in Europe. More casual observation suggests that there has been a significant increase in the provision of care coming within the new scheme and that the costs incurred by providers of such care are also high. |
The ending of the credit for child care, eg because carer—parent no longer works 16 h or loses job altogether, is abrupt. This differs from WFTC where continued for 6 months; moreover the parent will usually still have a contractual obligation to pay the provider. |
The ending of the credit for child care where the carer—parent no longer works 16 h is but one aspect of the behavioural effects which may arise. Thus it has been observed that the changes which happen, as it were, at the cliff edge. The effect of changing from 15 h to 17 h—or vice versa—is dramatic. There is every encouragement to get a job quickly rather than to get a good job with better long term prospects and there is little incentive to get promotion or to seek greater responsibility. Will the credits be helpful to families where income fluctuates as opposed to those working regular hours. |
More worrying may be the effect of the credits—and of loss of credits—on families and family formation; will the credits encourage single parent families; will a regular income from the state be preferred to the income earned by a new partner? Will couples decide to be ‘an item’ without actually living together? Will parents choose to have their children cared for outside the home rather than in it—and will grandparents be excluded. |
Much of this debate is carried through with a possibly exaggerated view of the benefits of some families and a reluctance to face up the ever expanding costs of ever expanding systems. What may be more worrying is the minefield created for parents. If they claim credits to which they are not entitled, there is the risk of prosecution by a zealous departmental officer whose department has been set a performance target . If so, the Act wil have created a form of entrapment of which a civilised society should feel ashamed. We shall see. |
Among much new literature see in particular (1) Lee (2003) 10 Journal of Social Security Law pp 7–51 (cited above), (2) IFS Commentary 91 sponsored by the Joseph Rowntree Foundation, The Benefits of Parenting by Adam, Brewer and Read, (3) Timing it Right? Tax Credits and how to respond to Income changes by Whiteford, Mendelson and Millar (Jospeh Rowntree Foundation) and (4) A Symposium on Welfare Reform under the Labour Government in Fiscal Studies 2003, Vol 24, ns 1 and 2. |