Government afraid to bite childcare bullet

The childcare challenge facing the Government and the community is a delicate barter between economic needs and social cohesion…

The childcare challenge facing the Government and the community is a delicate barter between economic needs and social cohesion, with each participant holding their breath in case the balance goes wrong. Too much economics, and we risk the social capital. Too little, and we threaten the future of the children we are trying to rear.

Writing about how the Government plans to support parents of the 150,000 children currently in paid childcare, the Tanaiste, Ms Harney used the metaphor of a "magic bullet" to describe the problem. It was an interesting use of language, the more so because it had been the term used by Allied Forces commanders in the Gulf and Kosovan wars.

The beauty of the magic bullet scenario is that it distances decision-makers from the human implications of the decisions they take. The Tanaiste, of course, opposed the very idea of using any one magic bullet solution to solve the problem of affordable childcare. But her use of a military term in the childcare issue is curious. Bullets are traditionally used to kill off problems, not to resolve them.

Statements made by the Tanaiste and her colleagues over recent weeks carry a strong suggestion that the childcare challenge is, if not killed off, then well on its way to being resolved. Government has concentrated on what it likes to call the supply side, which will help to create more childcare places for parents eager to work. That is good news for everyone concerned because it frees parents to participate in paid employment and helps the economy.

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However, the costs of childcare remain a burden on many families. The average weekly cost to Irish parents of having 150,000 children in paid childcare is now running at some £1.5 million. It amounts to a massive £54.6 million injected by parents into the economy each year.

Over £50 million - every penny squeezed from after-tax income - circulates in this way. That is the scale of investment parents are making in the visible economy, without the help of tax relief or a universal parent payment.

As a result, childcare costs amount to a non-refundable toll on work. The economic value of additional unpaid childcare remains incalculable, because the Government still won't generate annual household satellite accounts.

Investment ratios between parents and the State speak for themselves. For every £1 the Government plans to spend on childcare supply, parents as a sector are already spending £12 - out of net earnings. The ratio is heavily skewed in the Government's favour; it is also the highest in Europe.

Putting the good news about supply in that context changes its import. The Government's commitment to invest £47 million in childcare provision this year represents less than parents invest in one year's childcare. Its much heralded plan as part of the Programme for Prosperity and Fairness (PPF) to invest £250 million over seven years represents less than half of what parents invest over a five year period.

Parents have replaced PAYE workers as the pack-carriers of the Government's failure to get tax and welfare right. The Tanaiste has argued against giving them tax allowances for childcare costs on the grounds that it would further widen the gap between rich and poor. As one of the most socially responsible groups in the community, parents are likely to take that allegation seriously.

The problem is the Tanaiste assumes that any tax changes must operate on the same topdown principles as they always have. Why should they? A fluid mechanism of parent payments and tax reliefs/credits will work equitably, if it is targeted at the lower- and middle-income ranges.

Her analysis forgets that creche and childcare fees are income-blind. Creche fees for one child for one week in the Dublin region area currently average £100. The same fees are charged whether you earn a minimum wage of £4.40 an hour/£171.60 a week or the average (female) industrial wage of £220 a week - and both earners are liable for tax without being collectively entitled to targeted disadvantage measures.

Those earners are more typical childcare users than any other category. So childcare costs now are independently widening the gap between rich and poor. Women on minimum income and on the average industrial wage are already more disadvantaged than the top 8 per cent of women earning over £28,000 a year because their childcare costs more as a proportion of gross and net income.

Parents get child benefit, sceptics may reply. Yes, but child benefit is not a subsidy for childcare costs; it is a core welfare tool directed to children themselves, whether or not their parents are in paid employment.

Unfortunately, child benefit remains the only income paid directly to stay-home spouses, even after the stay-home allowance debacle which increased the dependency levels of spouses at home while doing nothing to enhance their inferior status.

The Tanaiste's refusal to countenance tax allowances because they will disturb the shining symmetry of her fiscal policy is also bad news for the idea of taxable universal parent payments, a related proposal on the PPF table.

The notion of allowing some people not to be taxed, and some people to be taxed, is open to the same objections. Integrating it with the stay-home spouse allowance requires a level of fiscal turnaround almost too complicated to bear.

What parents and prospective parents want, and are known to want, is a package of flexible payments and reliefs, added to workplace and social change so that they can graze off different schemes and strategies depending on the age of their children and their overall family and work commitments. Such massive investors in any other sector would have their needs taken very seriously.

Poor parents, having a rough time with all that early rising and painful bye-byes at the creche: talk about childcare allows otherwise tough Government ministers to smell sweet. Perhaps they mean it.

Or perhaps they are so accustomed to using this £50 million pounds for their darling economy that the alternative of making some solid commitment is a real life bullet they can't bear to bite.