Giving parents true choice: How can the Conservatives deliver on their pledge?

Analysis on how the government's day care plan can match the Conservatives' election pledge.

Stephen Harper was quick to move on his campaign pledge to scrap the federal-provincial child care agreements reached by the Martin government. In their place, Harper pledged to “introduce a family support policy that gives parents true choice in child care.”

How much choice will the Conservatives’ plan actually give parents?

The Harper plan

The Conservative plan includes a taxable family allowance and tax credits to encourage the building of new child care spaces. One thing that should be evident in those policy planks is that the Conservatives, like all of the other federal parties, are ready to invest public dollars into creating child care spaces and in providing income supports to families with children. The question is how to do that most effectively and equitably.

Under the existing child care agreements – which the Conservatives have said they are canceling – the federal government agreed to transfer $1 billion a year to the provinces both to build and operate child care services. The Harper government instead proposes spending $250 million a year in tax credits “to employers who cover the full cost of creating spaces.” The Conservatives also pledge to “provide similar support to non-profit associations to create spaces.” The idea of providing a tax credit to employers and non-profit groups who build child care spaces has been tried – in Ontario, for example. And it has proven an unsuccessful approach to building child care services. It is not at all clear how the Harper government’s plan is going to entice employers to get into the business of building child care centres or enable non-profits to do so. But if they succeed, there is still the question of how to pay to keep the programs running.

What government pays vs what families pay

The centerpiece of the Conservative child care plan is its Choice in Child Care Allowance. “The Choice in Child Care Allowance will let parents choose the childcare option that best suits their family’s needs.” It would appear that the Child Care Allowance is the Harper government’s plan to pay the operating expenses for child care – as well as giving parents a choice to provide full-time parental child care.

The annual cost, per-child for regulated child care is about $8,000 a year. The cost is higher in some provinces and there is some difference in cost between home-based or centre-based care. No one expects government to cover that entire cost. Even in countries with universal child care programs, parents typically pay between 25-30% of the cost of child care. If Canadian parents were expected to pay 25% of the annual cost of child care, they would have to spend about $2,000. That is not far different than parents in Quebec pay under the $7 a day child care program.

It's a modest sum per family

The Choice in Child Care Allowance would pay a maximum benefit of $1,200 a year per child under six. That is a mere 15% of the cost of child care. Most families, however, will only keep a fraction of the Allowance. The Caledon Institute has calculated that, after taxes, the Allowance shrinks to a very modest $460 for a two-earner family making $30,000 a year. A single parent earning just $30,000 would only keep $607.

Clearly the Choice in Child Care Allowance will not come close to covering what it costs to keep child care services running. Nor, as a result, will it enable parents to choose quality child care for their children. What about the option of staying home full-time?

What if one parent stays home?

One of the flashpoints in the debate over child care has been whether Canada’s tax and transfer system unfairly favours two-earner families over single earner households. A 1999 Finance Committee study into tax fairness for families with dependent children explored this question. In that debate, comparison was often made between taxes paid by a two-parent, single income family making $60,000 a year versus a dual-earner family making $60,000 a year. The committee astutely observed that such a comparison revealed confused reasoning about the real choices facing parents.

“When parents have a child the choices they confront are not to be a single-earner family earning $60,000 or a dual-earner family with the same income. The choices they face are generally to be a single-earner family with $36,000 of total income or a dual-earner family with $60,000 in total income, and higher expenses. And the choice between staying at home and re-entering the labour force is typically a short-run and a long-run decision. Most stay-at-home parents eventually re-enter the labour force.”

A drop in income

The committee found that two-parent families which chose to have one parent stay home full-time “would experience a drop in total disposable income of over $8,650.” According to Caledon’s calculations, the Choice in Child Care Allowance would only provide about $673 for those families.

(One of the major policy changes following that Finance Committee study was the extension of paid maternity/parental leave to one year from six months. For mothers who are eligible, this policy change meant being able to increase the time they and/or the father could spend with their infant children. Other countries have created maternity/parental leave programs that extend beyond the child’s first year, allowing parents to collect partial benefits while they work part-time, too. Yet, the important role of maternity/parental leave has been largely ignored in the debate about giving parents choices.)

Token choice only

As it is currently conceived, the Conservative plan offers families only token choice in child care. And in an awkward twist on equity, higher income households – those most able to afford either quality child care or stay-at-home parenting already – will receive the greatest benefit under the Choice in Child Care Allowance.

If the federal government wishes to give families true choice it will have to both find an effective way to create new child care spaces and to help families pay the cost of child care or make up for lost income from having a parent stay home full-time. That would cost more like $6,000 to $8,000 a year per preschooler rather than $600 to $1,200.

If the Conservative plans are not already written in stone, there may be ways to improve on them.

Considerations

First, since the Conservatives are prepared to spend $250 million a year to create child care spaces, why not provide this amount to provinces and territories for non-profit child care? It may not fund the number of spaces under the previous agreement. But at least it would provide provinces a bit of fiscal certainty that there will be some federal money to carry on the programs initiated under the first year of the existing child care agreement. And the transfer could help address the fiscal imbalance between federal revenue and provincial revenue.

Second, if the Harper government wishes to really give all families with young children $1,200 a year, they should deliver this as a non-taxable benefit. Built upon the existing Canada Child Tax Benefit, the extra $1,200 a year would bring maximum child benefit allowance close to $4,900 -- a benchmark child poverty advocates, like Campaign 2000, have set for a mature child allowance. If the price tag for a $1,200 benefit is too high, the federal government could reduce the amount it pays families to what, on average, families would receive if the benefit were taxable. The monthly cheque might be smaller, but there would be no nasty surprise for families at tax-time.

True choice

Taken together, these changes will still not give most families true choice. Frankly, the level of fiscal commitment the federal government is prepared to devote to families with children falls far short of their rhetorical support. This was equally true of the previous government. But these modest changes could at least reduce some of the chaos that will be unleashed by the abrupt cancellation of the child care agreements. And they will more equitably deliver greater income supports to families with young children.