When the Nanny State does Not Know Best
Civitas, 9 December 2004
Abigail is mother of two year old, Adam, and also the best friend of her neighbour, Brenda, also the mother of a toddler, Boris.
Both mothers have temporarily suspended paid work to stay home to raise a family. Currently, neither receives any government financial help to do so.
Under government proposals announced today, both mothers will shortly become eligible for considerable tax breaks, should either decide to resume paid work and hire a qualified nanny to look after her child instead.
Fast-forward in time from today to six months after the scheme has been introduced.
During this period, each mother has taken it in turns to look after her friend’s child so as to enable her friend obtain the necessary qualifications to gain nanny status.
Let us visit their two homes. During the day, Abigail works in Brenda’s home looking after Boris, being paid to do so as a nanny out of the proceeds of the tax-break for which Brenda’s husband has become eligible by hiring her. Meanwhile, Brenda is at work in Abigail’s house, looking after Abigail’s son, Adam, being paid to do so from the proceeds of the tax-break Abigail’s household is claiming.
Both Abigail’s and Brenda’s families now enjoy greater disposable income than before the scheme was introduced. Yet each mother would prefer to look after her own child who, in turn, would prefer being cared for by mummy than nanny.
‘Wait a minute’, the two mothers simultaneously exclaim one day to each other when returning each other’s child whom they have spent the day looking after. ‘Why don’t we only pretend to look after each other’s child? That way our husbands could claim the tax-break, without either of us having to forfeit looking after our own child.’
The government, however,has anticipated this wheeze and created an Inspectorate to ensure the tax break only goes to families where parents do not look after their own children. The cost of the Inspectorate is paid for by a tax rise that has all but wiped out any financial benefit either family previously gained from claiming the tax break.
The result of the scheme has been to create a new tier of bureaucracy to ensure families gain no financial aid from the state unless children in them are separated from their parents during the day.
Coda: Abigail and Brenda finally decide it is not worth the emotional cost to look after each other’s child at the expense of being able to look after their own. So, they decide to revert to being full-time mothers again.
Yet, each family must now bear from its weekly wage its share of the cost of maintaining the Inspectorate. The final net result is that both families have less disposable income than before the scheme was introduced. Otherwise, all else is as before.
Today’s papers report Children’s Minister, Margaret Hodge, as boasting: ‘Our strategy is putting children at the heart of the modern welfare state for the 21st century. The childcare approval scheme is an essential element of our offer to families.’
Many families might wish her offer had been one they could have refused. But, on this matter, as on so many others today, their wishes will be disregarded. For today’s nanny state considers it knows better by far than ordinary folk do what is in their best interests.
I agree – the state should be a disinterested party. Not uninterested – the tax sytem should be neutral and designed to allow everybody to make their own choices. This also has the virtue of simplicity and low admin costs (which is why Gordon Brown won’t like it).
If everyone, including children had transferable tax allowances, everyone’s choice would be equally viable. In traditional type families, the father would claim the tax allowance of his entire family from his pay. If the wife worked, she could use her allowance herself. The children would be entitled to theirs whether mum worked or not. Mo favouritism to any type of choice, and each family would be free to choose what was best, not what was economically viable, for themselves.
This ridiculous situation has long been the case for professional nursery nurses. They can get a tax subsidy if they go out to work caring for other people’s children and simultaneously pay someone else to look after theirs. But they can’t get it if they look after their own children.
I don’t know how the mothers in this example became qualified within 6 months though (it took my wife 3 years). Is it something to do with Margaret Hodge’s repeated attempts to water down the qualification and staffing requirements in childcare so that it can be provided cheaper and worse?