Pat and Sam are a couple with two young children, Cassandra, aged 3, and Clairvoyance, aged 1. They live in Liverpool. Until now, both have been able to continue with their full-time jobs, because Sams mother, Emily, could look after both children during the day. (Because both Pat and Sam are in paid employment, Cassandra is entitled to 30 hours of free childcare during term time which she was using). However, Emilys health has rapidly but temporarily deteriorated and she needs care herself for the time being so shes no longer able to provide it for her grandchildren when needed. Pat and Sam are weighing up options as they have secured a nursery place for Clairvoyance either part-time or full-time should they choose to use it.

2.1 Briefly explain two factors that could disproportionately affect Sams lifetime financial well-being if she were to give up her full-time job to look after the children until they are in school. (4 marks)

2.2 The couple is considering three options and the different tax credits they might be entitled to, on top of child benefit. Option A: both stay in their full-time jobs (40 hours per week) and pay for the childcare needed (over and above the free entitlement). Option B: Sam reduces her working hours to 20 hours per week (on the same hourly wage) and the household pays for the remaining childcare needed for their two children while they are both at work (including during school holidays). Option C: Sam quits her job entirely to look after her children full-time (as a result, Cassandra is only entitled to 15 hours of free childcare during term time). a.Using the Tax credit calculator, complete the entries in Table 1 to work out their total tax credit entitlement and their total net income after childcare. (4 marks)

Table 1 Pat and Sams childcare options

	Current	A	B	C
Weekly
Hours of employment (Pat/Sam)	40/40	40/40	40/20	40/0
Hours of childcare to pay	0.00	68	32	0
Childcare cost ()	0.00	340	160	0
Yearly
Childcare cost (52 weeks) ()	0.00	17,680.00	8320.00	0.00
Gross earnings Pat ()	22,880.00	22,880.00	22,880.00	22,880.00
Gross earnings Sam ()	18,720.00	18,720.00	9360.00	0.00
Gross earnings total ()	41,600.00	41,600.00	32,240.00	22,880.00
Net earnings Pat ()	18,939.28	18,939.28	18,939.28	18,939.28
Net earnings Sam ()	16,110.48	16,110.48	9247.68	0.00
Net earnings total ()	35,049.76	35,049.76	28,186.96	18,939.28
Child benefit ()	1788.80	1788.80	1788.80	1788.80
Working Tax Credit ()	0.00	0.00
Working Tax Credit childcare element ()	0.00	1276.20
Child Tax Credit ()	0.00	6105.00
Total net income ()	36,838.56	44,219.76
Total after childcare ()	36,838.56	26,539.76

b.Explain which option seems financially better in the short-term and why, and what it does say about the type of breadwinner model such a tax benefit system implicitly promotes, for couples with young children. (3 marks)

2.3 Outline two other considerations that the couple may weight up (financial or otherwise) which might lead them to choose another option. (4 marks) (Total marks available for Question 2: 15 marks