Labour Market

New tax cliff edge will leave parents worse off


In the Media

Research by Christopher Snowdon quoted in Business Insider

Government and Institutions

Matthew Lesh quoted in The Telegraph

IEA Director of Public Policy and Communications Matthew Lesh has commented in The Daily Telegraph warning that the government’s new childcare reforms could leave parents worse off.

The article read:

“Jeremy Hunt, the Chancellor, used his Spring Budget to extend 30 hours of free childcare to all working families with toddlers over nine months old. However, this support is removed when one parent earns over £100,000 – also the threshold when they start to lose their personal tax-free allowance.

“The combined cliff edge of support means that a parent with two small children will be worse off if they are earning £134,500 than if they were earning £99,000, according to the Institute for Fiscal Studies.

“Matthew Lesh, of the Institute for Economic Affairs, said: ‘If the underlying goal with this childcare policy is to ensure parents, particularly mothers, get back into or stay in the workforce, there is a huge disincentive factor here that could undermine the whole enterprise.

“It will discourage people from working or from working hard, going for promotions and building up their skills over time. It could slow people’s career progression because they are fearful about falling over this threshold. The Government seems to be pretty much doing everything they can to sting the lower end of top income earners.”

The full article can be read here.