Childcare a major issue as government considers new report

Childcare is now a key policy issue in Ireland, with trade unions and employers urging the government to act on the recommendations, published in February 1999, of a working group established under the Partnership 2000 national agreement. The government has decided to refer the report to a new "interdepartmental" group for further consideration well in advance of the next Budget, due in December 1999.

Childcare is increasingly a central issue for Ireland's social partners, and the government is being urged to implement the findings of a report by an expert working group set up in accordance with terms of reference drawn from Ireland's current three-year national agreement, Partnership 2000 (P2000) (IE9702103F). The report was published on 4 February 1999. With labour shortages evident in the economy and a growing demand for measures to enable both parents to continue or to resume work, the issue will demand the government's attention in the next Budget, which is not due until December 1999.

Expert group's report

ThePartnership 2000 Expert Working Group on Childcare drew up its report to fulfil a commitment in P2000 (clauses 5.6 to 5.8), which states that the purpose of the exercise is to establish a national framework for the childcare sector.

The main recommendation of the P2000 expert group is the establishment of a system of tax allowances and subsidies, including personal income tax relief of: up to IEP 4,000 for the first child under five years of age; IEP 3,200 for other under-fives and IEP 2,000 for those aged between five to 12 years. It is estimated that this would cost the state IEP 30 million in the first full year of operation. The report suggests that if all childcare were to be immediately formalised (and if receipts were given), the cost would jump from IEP 30 million to almost IEP 66 million in a full year. This cost would be likely to increase over time as more childcare services would move from the informal economy into the formal economy.

The working group, however, suggests that various factors would result in parents not taking up their full tax-free allowances for receipted childcare. As many as 45% of married two-earner families have one partner working part-time, and couples with one partner working may end up using only a quarter of their full allowance, the report states.

The report notes that the independent government-funded organisation, the Economic and Social Research Institute (ESRI), has found that childcare can cost between IEP 56 and IEP 71 a week. This would suggest that, while those positioned at the higher end of the cost spectrum would come close to fully availing themselves of the proposed tax-free allowance, many would fall far short.

Broader measures

The option of using child benefit payments to support childcare was also considered by the working group, which noted that this approach had the advantage of being available to all families and of offering women a "genuine choice". However, it found that an extra IEP 20 per week in child benefit would be needed to make any meaningful contribution, a move which would cost IEP 316 million per annum for all children up to five years old and IEP 728 million per annum for all those aged up to 12.

Therefore, the option is rejected as expensive and furthermore, "as it is not targeted on childcare", it is "not guaranteed to increase the provision of childcare places or to improve the quality of childcare without a parallel investment in the supply side of childcare".

Regarding the position of lone parents, the report finds that the current one-parent allowance, which gradually tapers off as the parent's earnings increase from IEP 6,000 to IEP 12,000 per year, means that parents at the upper end of this limit face a "poverty trap" when confronted with childcare costs and the removal of their allowance. It therefore recommends that the ceiling of earnings under the one-parent allowance scheme should be increased to IEP 16,000 on a case-by-case basis, where lone parents incur receipted childcare costs.

Supply side

The working group also recommends various measures aimed at increasing the supply of childcare providers in the formal sector. These include enhanced capital allowances for group-based childcare services and childcare businesses and a new grant scheme for small-scale private and self-employed childcare providers, with IEP 2 million to be allocated for this purpose in 1999 alone. A further budget of IEP 5 million per annum was recommended to provide employment grants of up to IEP 5,000 for each additional new staff member employed in private and community childcare facilities. This money would be available through County Enterprise Boards.

Employers should also be allowed to offset against tax certain expenditure on childcare for their employees. This could include the provision of childcare facilities, vouchers for childcare, or direct subsidisation of childcare places.

Going some of the way towards these aims, the government has already said that measures are to be introduced to allow capital expenditure incurred in connection with buildings or premises constructed by employers for childcare purposes to be written off against tax.

Political sensitivities

The report has raised the sensitive issue of providing tax relief in situations where parents are working, but without offering anything further than current system of child benefit for those parents who remain in the home on a full-time basis. The sensitivity of this issue was referred to by the Finance Minister, Charles McCreevy on 2 December 1998 in his 1999 Budget speech. Mr McCreevy warned that consideration would have to be given to the "question of equity between parents who stay at home to care for children and those who have to meet additional childcare expenses when they go out to work."

The assistant general secretary of the Irish Congress of Trade Unions (ICTU), Patricia O' Donovan, said that while there should be recognition for parents in the home, this should be treated as a separate issue. She has called for the establishment of an implementation group on childcare, which would include the social partners. The Irish Business and Employers Confederation (IBEC) wants the government's new interdepartmental group, to which the expert group's report has been referred, to report as speedily as possible so that measures can be included in the next Budget.

The interdepartmental group is being chaired by the Department of Justice, Equality and Law Reform with representatives from the Departments of: Enterprise; Trade and Employment; Health and Children; and Social, Community and Family Affairs.

Commentary

The increasing importance of the childcare issue has been underlined by the rapid growth in female participation in the labour force in the 1990s. The existing ad hoc system of home-based childminders, workplace crèches and other arrangements is starting to show signs of strain, and costs to parents have been cited as a barrier to further female workplace participation.

Calls for childminding expenses to be written off against tax have been around for the last two Budgets. The linking of the issue with the national agreement makes it likely that the question of financial support for childcare will assume a greater role in the trade union agenda towards the end of 1999, in the run-up to the Budget for 2000 and the talks over a successor to P2000.

The key issue is whether the Government will opt for a system of tax reliefs and incentives proposed in the report or go for the more expensive, but ultimately more popular, option of substantially increasing the current modest level of child benefit payable to all parents. (Brian Sheehan, IRN, John Geary and Tony Dobbins, UCD)