This just in from Polly

If David Cameron really does bring in tax breaks for nannies and domestic cleaners, the dead-weight cost will be so phenomenal before it creates any extra childcare that Labour can start by taking that money back to spend on making universal childcare a reality.

Yes, Polly has just said that reducing taxation increases the deadweight cost of taxation.

Ho hum.

12 comments on “This just in from Polly

  1. The scheme is supposed to be self funding, in that the cleaners and nannies have to be tax and national insurance payers in order for their clients to claim the tax relief. So, amazingly, she’s completely wrong anyway. But writing that does prompt the question – why not just make it legal to pay cleaners and nannies ‘tax free’ (i.e. recognise what happens most of the time anyway) and save on form filling?

  2. She means the “deadweight” cost to the state (whatever that means).

    Remember, everything belongs to the state. It’s not the state taking 40%, it’s the state giving you 60% through its magnificent beneficience.

  3. Seriously though, she’s just misusing the term “dead-weight cost” because she doesn’t understand what it means. What she is trying to get across is that it will cost the govt a lot of money in lost taxes, before it increases the amount of childcare being done.

    A bit like, if the govt introduced a real school voucher scheme, they would have to pay for all the existing privately schooled kids immediately before they paid for a single new school place.

    True. I suppose we do need a word for this, even though it is very definitely not a deadweight cost because it does not reduce the amount being produced by the economy (unlike tax).

    I have no idea what David Cameron is doing subsidising childcare and domestic work. Obviously it makes no economic sense, but does it even make electoral sense? Why would anyone want to increase the amount of childcare being done?

    Of course, if it makes no economic sense for David Cameron to do it, it makes no economic sense for Polly Toynbee to do it either. I for one do not support the subsidy of children, even if it’s not dysgenic. (Cameron’s advocating benefits which will be snaffled by the middle class, therefore perhaps eugenic; Polly’s “free universal childcare” will be dysgenic.)

  4. “I have no idea what David Cameron is doing subsidising childcare and domestic work.”

    @Hugo, I think he is making virtue of a necessity. If currently all of this work had tax paid on it, I would agree with you, but as I understand it, it is partly being done because currently a lot of this sort of work is done under the tax radar anyway. I think the idea is not to increase the amount of childcare done, but increase the amount of tax that is paid on childcare that is currently done, but does not involve any tax whatsoever.

  5. I would hazard a guess that by far the greater part of Nanny-pay comes from income taxed at 40%.
    Unless nanny-pay has escalated beyond belief since my day, I would further hazard that even Noreland Nannies recieve remuneration below the 40% threashold. So, how does the idea that alowing high rate relief and paying low rate wages give an increase in tax recievable?

  6. That was today’s laugh. Polly is a national treasure (as Amanda is over here). I’m only surprised Ritchie didn’t say it first.

  7. I knew Polly would be keen on this idea. She would for the first time be able to afford a tax-paying cleaner, which would do wonders for her leftie credentials. Villas in Tuscany don’t come cheap, you know.

  8. @ Nick Luke – you’re assuming all pay would be given tax relief at 40% (and ignoring national insurance as well) – it’s likely both the amount and rate of relief would be limited (precisely to limit the cost to the exchequer)

  9. Of course, when everybody is registered to receive their tax credits and then the next Labour government repeals the credit, those who suddenly stop having a nanny or a cleaner, suddenly get a visit from a HMRC Inspector don’t they?

    Funny that. Equally, once everybody is registered and the nanny / cleaner is happily receiving her state pension contributions its harder for the middle class employer to withdraw it, for example if the government (of whatever flavour) decides that such tax credits have achieved their aim (getting undeclared earnings out of the closet) and reduce or withdraw the tax credit.

    Cynical – Moi?

  10. The idea that only the state and approved employers should employ citizens, not other citizens, is a nasty ideological one so I’m theoretically in favour of it being relaxed.

    Having said that, I’m sure John Galt is quite right, once everybody is signed up the tax relief will be removed, broadest backs bearing the greatest burden, etc.

    Incidentally, if the coalition can’t balance the economy, what any future Labour government might do is quite academic.

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