Public Service Alliance of Canada BC

Eliminating separate assistance program reduces Ottawa’s payment to most needy

OTTAWA — Low- and middle-income families will realize the smallest net benefit from the Harper government’s $1,200-a-year child-care payment in part because the Conservatives are scrapping a separate assistance program.

The Conservative plan for meeting the country’s child-care needs is to give families a direct payment of $100 a month, $1,200 annually, for every child under 6. The specifics of how that plan will be unveiled are expected to be in next Tuesday’s budget.

But the young-child supplement of the Canada Child Tax Benefit, which currently pays $20.25 a month to parents who do not claim child-care expenses for their preschool-age children, will be eliminated at the same time. The benefit is due to increase in July to $249 annually.

The Tories outlined their intention during the election campaign to scrap the young-child supplement, and the government confirmed that it will do so to the Caledon Institute, a think tank that deals with child-care issues.

In a report to be released today, the institute takes the government to task for rolling the young-child supplement into the child-care allowance.

The report, called “The incredible shrinking $1,200 child-care allowance and how to fix it,” says the supplement most often goes to families of low or modest income because higher-income parents are more likely to claim child-care expenses and are therefore disqualified from receiving the payment.

“When we factor that into the analysis,” said Ken Battle, the institute’s president, “it makes the inequality gap between the child-care allowance benefits for low- and modest-income families and high-income families all the wider, because the low-income families are losing that $249 annually whereas higher-income families never got it.”

The institute has calculated that the families who will benefit most from the child-care allowance, after taxes and clawbacks, are those making $200,000 a year or more with one parent at home. They will keep $1,076 of the $1,200 annually.

Families with two working parents and a combined income of $30,000, by contrast, will keep just $199 annually of the new payments.

The institute released a report into the Conservative child-care plan in January but did not realize at that time that the young-child supplement would be eliminated, Mr. Battle said.

So he went back and recalculated after government officials confirmed that this was their intention.

His report looks at the ways the government could improve the allowance to ensure that it gets into the hands of people who need it most. “If you don’t do anything else,” Mr. Battle said, “don’t abolish the young-child supplement.”

But the best solution, the report says, is to tack the child-care allowance onto the Child Tax Benefit, which is not subject to income tax and is gradually reduced as income rises. Unlike the Conservative child-care plan, this would not favour one-income families over two income-families.

If the two benefits were blended, the institute projects that all families with a combined income of $170,000 a yar would get some of the child-care allowance promised by the Conservatives, with lower-income families getting more than those at higher-income levels.

It is a plan that has found favour with the opposition parties and some social groups.

“The Canada Child Tax Benefit is a very effective and proven program,” Mr. Battle said, “and in fact it’s used to deliver a number of provincial child benefits as well and the child disability benefit.”

And there are some additional practical considerations, Mr. Battle said. “We’ve got this Canada Child Tax Benefit machinery that works. It would be so easy simply to plug it in. . . . There’s no added administrative costs.”

Olivia Chow, the NDP child-care critic, said yesterday that Prime Minister Stephen Harper “knew full well when he announced this [child-care plan] that he was rolling the young-child supplement into this so-called $1,200 family allowance. So it’s not really $1,200.”

Ms. Chow asked Human Resources Minister Diane Finley yesterday in the House of Commons whether she would do something about the deductions that will eat up much of the promised child-care allowance.

The question came after the minister faced a barrage of accusations from the Liberals that the Conservative plan is nothing more than “vague promises and numbers pulled out of the air.”

Ms. Finley, who refused requests for an interview, replied only that five provinces have agreed to not claw back the child-care allowance. “As for the federal government, I am afraid we will have to wait until we see the budget.”

source: http://www.theglobeandmail.com/servlet/story/RTGAM.20060426.wxchildcare26/BNStory/National/home