More childcare subsidies will have unintended consequences
4 April 2023
SUGGESTED
Housing and Planning
Mark Littlewood writes in The Times
3 April 2023
Energy and Environment
Economic Theory
Matthew Lesh quoted in Conservative Home
IEA Director of Public Policy and Communications Matthew Lesh has been quoted in Conservative Home on the government’s decision to increase childcare subsidies in the budget.
The article said:
“There are currently 78,000 parents with children under the age of four who have salaries of £100,000 or more and are thus vulnerable to this tax trap. Moreover, this threshold is frozen: as a result, the number will swell to 133,000 by 2027/8.
“Although not all of the existing 78,000 will be affected (because some will be especially high earners) almost all of the 55,0000 individuals who will cross the threshold for the first time will be immediately hit by the fall in support. They will see a material drop in their disposable incomes, despite the fact that their salaries have gone up. Matthew Lesh, of the Institute for Economic Affairs, has said: ‘If the underlying goal with this childcare policy is to ensure parents, particularly mothers, can get back into or stay in the workplace there is a disincentive which could underline the whole enterprise.’
“He’s right. It will discourage people from working or from working hard going for promotions and building up their skills over time, and could slow people’s career progression because they are fearful about falling over this threshold.”
You can read the full piece here.
The article said:
“There are currently 78,000 parents with children under the age of four who have salaries of £100,000 or more and are thus vulnerable to this tax trap. Moreover, this threshold is frozen: as a result, the number will swell to 133,000 by 2027/8.
“Although not all of the existing 78,000 will be affected (because some will be especially high earners) almost all of the 55,0000 individuals who will cross the threshold for the first time will be immediately hit by the fall in support. They will see a material drop in their disposable incomes, despite the fact that their salaries have gone up. Matthew Lesh, of the Institute for Economic Affairs, has said: ‘If the underlying goal with this childcare policy is to ensure parents, particularly mothers, can get back into or stay in the workplace there is a disincentive which could underline the whole enterprise.’
“He’s right. It will discourage people from working or from working hard going for promotions and building up their skills over time, and could slow people’s career progression because they are fearful about falling over this threshold.”
You can read the full piece here.
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