Remember November last year when then Prime Minister Jacinda Ardern announced this policy?
Today I can announce that the Labour Government will significantly expand childcare assistance to New Zealand families.
From April we will lift the household income thresholds on our Childcare Assistance subsidies for those with children under 5 in early childhood education, and aged 5 to 13 at an approved before or after school and holiday programme.
Our changes will mean 54 per cent of all New Zealand families with children will now be eligible for subsidised childcare assistance.
Over 10,000 additional children will become eligible for support.
And nearly every sole parent in New Zealand will be eligible for childcare assistance
To give you an example of what this will mean, a family with two parents both working 40 hours per week on $26 per hour with two children under five, who would not have been eligible for childcare assistance previously, will now be eligible for $252 per week.
These changes are on top of the 20 hours of early childcare education provided by the Government for those aged 3 to 5 and are a pre-Budget commitment that will take effect from April next year, at a cost of $48 million a year.
The cost of the policy was estimated to be $190 million over four years. At the same time Ardern announced increases to the Family Tax Credit.
Well yesterday National had its chance to reach out to its base in election year and appeal to the things that matter to them. Instead of this it chose to join in the bidding wars and it came up with this policy:
To support Kiwi families bearing the brunt of the cost-of-living crisis, National will introduce FamilyBoost – a childcare tax rebate of up to $75 per week on the costs of childcare.
This means more than 130,000 lower and middle-income families could keep up to $3,900 more of what they earn every year.
Families earning up to $180,000 will receive a 25 per cent rebate on their early childhood education expenses, up to a maximum of $75 per week paid directly into their bank account every fortnight.
All families earning up to $180,000 with childcare costs are eligible. However, to ensure support goes to families who need it most, the maximum weekly rebate will gradually reduce for families earning over $140,000. Maximum weekly rebates for families earning $150,000, $160,000 and $170,000 are $56.25, $37.50, and $18.75, respectively.
The cost is $249 million per year. The policy is essentially a mini Working for Families adjustment, something that John Key famously described as Communism by Stealth.
The announcement is interesting. National says that it will be paid directly to the bank accounts of the families. Currently the subsidy is paid to the provider. Having part of the payment paid direct to the provider and the other part to the family who will then have to pay it to the provider is very messy and, dare I say it, will require more public servants to be employed.
The subsidy will likely cause charges to increase. I can’t see the likes of National Party Donors and Sean Plunkett sponsor the Wrights passing on the chance to improve profitability.
I suspect that David Seymour agrees with this comment. He criticised Labour’s policy and said that any increase would be inflationary if the Government did not make it easier to get more early childhood teachers and workers into New Zealand.
Carmel Sepuloni has pointed out the problems. From RNZ:
Social Development Minister Carmel Sepuloni said it was “good to see National finally recognising the importance of childcare assistance”.
National’s policy was “not very well thought through and doesn’t target those who need the most help, particularly those on the lowest incomes”, Sepuloni said.
She accused National of not properly considering how they would pay for the policy.
“When we introduced 20 Hours ECE in 2007 there was an increase in average hours attended per week for three and four-year-olds of around 8 -10 percent,” Sepuloni said.
“If just a quarter of the 130,000 households increase the number of hours their child spends in childcare by five hours a week, their policy blows out by around $70 million a year – and that’s likely to be a conservative estimate.”
National claims that it has done the modelling and disputes this. I would question the quality of National’s modelling generally.
National claims that it will fund the change by employing less consultants. That is an option, if they want to employ more public servants, or do nothing.
All in all the policy choice was a strange one to make and suggests that it was chosen for political strategic reasons rather than as a statement of principle. It really feels like middle class welfare rather than an attempt to address poverty. It is comparable to Labour’s proposal but costs more because more wealthy people will receive it.
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