Today’s announcement of childcare subsidy, up to the value of £2,000 per kid under the age of 12, is welcome news. As The Spectator argued last week, this is perhaps the smartest single move the Chancellor can make – too many highly-skilled women want to work, but cant afford to as they’d face Europe’s highest childcare fees. And then the Treasury has to spoil it all by lying about the policy. The government website has this to say:
The first thing parents need to know is that the scheme is not ‘tax-free childcare’ at all. So how on earth does the Treasury justify claiming otherwise? Its explanation is below:-
‘For every 80p you or someone else pays in, the government will top up an extra 20p This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year.’
So for ‘most people’ the payment (and it is a payment, not a tax refund) will be the same as the income tax they pay. But this is not the same as making it tax free. For a start, it doesn’t refund the other taxes on wages: employers NI, the NI paid by workers directly. Nor will it exempt the parent from paying the taxes for hiring the nanny, which can work out a third of their wage. And you can receive the cash even if you don’t pay income tax at all.
And if you’re one of the 4.5 million dragged into paying income tax at a higher rate than 20p in the pound, this policy will offer nothing resembling tax-free childcare.
Also, note the slippery use of language ‘which gives the scheme its name’ – as if this was a baptism ceremony and it decided to call this policy ‘Tax-Free Childcare’ rather than ‘George’ or ‘Michelle’. Could RBS describe a service as “free” if it intended to charge a million or so of those who used it? 
Sure, some companies do use some artistic license when selling their products – but you can’t stretch the truth when selling financial products in Britain. Not any more. Only in government do such distortions remain.
Peter Oborne wrote a very good book about these kind of lies. And I use the word advisedly: either a policy is tax-free, or it isn’t. It’s a binary divide. To claim it is, when it’s not, is a lie rather than an exaggeration. The millions hauled into paying the 40p rate will not be given tax-free childcare – but the government wants to mislead them into thinking otherwise before election day. No10 has even made the lie into a Twitter hashtag:-
Now, this matters because the government imposes tight regulations on the financial services industry. If a bank sold a policy as being ‘tax free’ when it wasn’t, they’d be guilty of misselling and they’d be prosecuted by the Financial Conduct Authority – and rightly. If tomorrow’s press refers to this ‘tax free childcare’ then you can file an online complaint to the Press Complaints Commission under the accuracy clause. They’d find in your favour. If a supermarket advertised ‘tax free childcare’ and it wasn’t tax free, they’d be done by the Advertising Standards Agency for telling porkies.
But if the Tories put up a mendacious poster, and you called up the ASA to complain, you’d be told: sorry, they don’t apply their rules to politicians:
‘For reasons of freedom of speech, we do not have remit over non-broadcast ads where the purpose of the ad is to persuade voters in a local, national or international electoral referendum. Complaints about political advertising should be made directly to the party responsible for that advertising.’
And good luck to you complaining ‘to the party responsible’ about a political porkie. I called HM Treasury earlier on, and asked how they justified using misleading language that they’d prosecute banks for. The response? ‘That’s an interesting observation’. No more.
And I can see it from their perspective: who’s going to complain about little lies like this? Sure, they’ll get some hassle from a few lowlife bloggers. But will the broadcasters pick up such a relatively small point? Will the newspapers? It’s pretty unlikely.
This is a small example of the culture of political lying which grew in the Labour era, and has never quite buried by the Tories. The decision by the Statistics Authority to chastise politicians who abuse statistics is a step forward. But no one will admonish ministers for a non-statistical attempt to mislead voters – in this case, the 4.4 million who pay the 40p tax rate.
Now, I’m not saying this is a big issue – it’s a relatively small one, it’s just everyday spin. And, again, this is a good policy – probably the best thing George Osborne will do all year. But it has been sold using mendacious spin, the spin that would not be tolerated in any other industry in Britain. It’s time that our ministers complied to the standard of accuracy that they so piously set for others.
UPDATE The below government infographic further explains shows how the system works. Notice how the phrase ‘tax free’ is dropped inexplicably into the middle. You pay in £4, the state (i.e., the taxpayer) contributes £1 – even if you don’t pay tax.
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