Childcare facilities to benefit in Budget

Childcare is likely to be targeted on several fronts in the Budget. However, sources say that the main focus will be on increasing the supply of childcare, with new tax-free allowances for parents promised before the election unlikely to feature tomorrow, although a commitment may be given to act on the conclusions of a study to be forwarded to Government this month

Mr McCreevy is likely to signal that childcare is a Government priority and that, as part of a longterm strategy, immediate measures will be introduced to increase the supply of childcare. Benefit-in-kind tax on employer-subsidised childcare may be eliminated in the Budget as a measure which would directly benefit some families.

The Budget may also announce the provision of capital allowances for private childcare centres - similar to those on offer for nursing homes - although details may be put off until the Finance Bill. The Government is worried - based on a preliminary study undertaken - that simply increasing demand for childcare by allocating tax allowances may merely increase demand on an already over-stretched system. The Government has also been looking at tax incentives to encourage more provision both from employers and individuals. However, its pre-election promise of an allowance to both those working at home and those working outside the home means no move is likely in the Budget.

A study going to Government later this month from a Government-sponsored expert group is expected to recommend that initially tax relief be directed to those leaving home to work, as a means of increasing the supply of labour.

Any support programme will aim to move childcare out of the informal or black economy. It is possible that some income from childminding would be exempt from income tax and social welfare means assessment and possible that some exemption will be given to current childminders registering. However, the details of this and how appropriate tax allowances are to be structured have yet to be decided.

Some money is also expected to be allocated to the Minister for Education, Mr Martin, for his early childhood intervention strategy, which would also go some way to providing child-minding facilities in disadvantaged areas.