Finances of Parenting

Childcare on the Ballot

Peter Shawn Taylor
September 6, 2021
Political theory suggests that freedom and equity are opposing concepts. Allowing greater individual autonomy is assumed to curtail fairness for the less advantaged, and vice versa. Not so when it comes to the 2021 electoral debate over childcare – one of the few areas of sharp contrast between the two main parties. Peter Shawn Taylor takes a close look at the Liberals’ proposed national childcare system and the Conservatives’ refundable childcare tax credit and finds one option delivers not only greater choice for all parents, but superior support for low-income families as well as the promise of new spaces.
Finances of Parenting

Childcare on the Ballot

Peter Shawn Taylor
September 6, 2021
Political theory suggests that freedom and equity are opposing concepts. Allowing greater individual autonomy is assumed to curtail fairness for the less advantaged, and vice versa. Not so when it comes to the 2021 electoral debate over childcare – one of the few areas of sharp contrast between the two main parties. Peter Shawn Taylor takes a close look at the Liberals’ proposed national childcare system and the Conservatives’ refundable childcare tax credit and finds one option delivers not only greater choice for all parents, but superior support for low-income families as well as the promise of new spaces.
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You can call it the 2021 federal election. Or you can call it Beer and Popcorn: Round Two.

Amid a contest notable for its seeming lack of significant policy differences between the two main parties – the Conservatives under leader Erin O’Toole having neutralized many potential attacks from Prime Minister Justin Trudeau by essentially producing an everything-goes Liberal-style election platform with a blue cover – there is one topic that offers voters an actual and consequential difference of opinion. One that harkens back to the 2006 federal election.

A rare difference of opinion: Childcare policy represents one of the few areas of sharp contrast between the election platforms of Conservative leader Erin O’Toole and Liberal Prime Minister Justin Trudeau. (Source: The Canadian Press/Martin Chevalier – POOL)

Back then, the centrepiece of Liberal Prime Minister Paul Martin’s platform was a $5 billion, five-year institutional childcare plan. Modelled on the Quebec experience, it was to be delivered via a series of federal/provincial agreements. In response, Conservative leader Stephen Harper countered with the Universal Canada Child Benefit (UCCB), a $1,200 cash payment to families for every child under the age of six regardless of their childcare arrangements. The stark contrast between these competing visions was simple for voters to understand and offered an easy target for partisan commentators – perhaps too easy. Martin’s communications director, Scott Reid, couldn’t resist sneering that the Conservative plan was little more than an opportunity for parents to blow their money “on beer and popcorn.” Reid would soon regret the lapse, for it proved a crucial moment in the election. Nearly a decade of Tory rule followed.

Fifteen years later, they’re at it again. An incumbent Liberal government is once more promising to create a national childcare system, with Quebec as its inspiration. Every province save Ontario, Alberta and New Brunswick has already signed up for its share of $30 billion in federal funding meant to lower the average cost of childcare to $10 per day nationwide by 2026. (The NDP have a nearly identical proposal.) And the Conservatives under O’Toole have returned fire with another policy innovation that promises to send money directly to parents.

The Conservative platform proposes to convert the existing federal Child Care Expense Deduction (CCED) into a refundable tax credit payable on a sliding scale that initially covers up to 75 percent of a family’s childcare expenses and declines as household income rises. Doing so greatly increases the program’s value to parents at the lower end of the income spectrum. And the cash will be paid out regularly, rather than as a tax refund at year’s end. Under O’Toole’s plan, families with an annual income of $30,000 will receive $6,000 per year. Those earning $50,000 annually will get $5,200, and so on. It is a decidedly progressive policy that bottoms out at 26 percent coverage for families earning over $163,000 per year.

Once more into the breech: The 2021 debate over childcare policy repeats the dynamics of the 2006 federal election when Liberal Prime Minister Paul Martin (left) argued for a national childcare system and Conservative leader Stephen Harper (right) promoted his Universal Canada Child Benefit. (Sources: (left) photo by Michael Ignatieff, licensed under CC BY-ND 2.0; (right) London Summit, licensed under CC BY-NC-ND 2.0)

And in another throwback to 2006, the Conservative plan has again been attacked by national daycare advocates as retrograde and insufficient, albeit without the deliberate insults about “beer and popcorn.” A recent Toronto Star editorial declared the “Liberals and NDP both have solid plans for child care. The Conservatives do not.” The left-leaning Canadian Centre for Policy Alternatives (CCPA) claims the Liberal plan to be far more generous to parents, as “the average family in 32 cities would see lower [daycare] fees…than they would under the Conservative tax credit plan.” And numerous academics have lamented that while the Tories’ tax credit scheme may give money to parents, it won’t add new non-profit, “high-quality” childcare spaces to the current system.

The folks who claim to know better are thus once more promoting national, institutional childcare at the expense of allowing parents control over how any of that money is spent. Such a plan will also crush independent childcare operators (typically female-run small businesses) by favouring non-profit delivery over private sector options. And the Conservatives have again taken a contrary stance that promotes parental choice. We’ll soon find out if the 2021 federal election is one of those sequels that ends up the same as the original.

Birth of an Idea

The Conservative tax credit conversion finds its immediate inspiration in a March 2021 paper by C.D. Howe research fellow (and Harper-era Conservative advisor) Ken Boessenkool and Carleton University professor of political management (and former federal Liberal staffer) Jennifer Robson that made the proposal its main recommendation. The paper’s bipartisan nature “was an attempt to find common ground” on the fractious childcare debate, says Boessenkool in an interview. Turning the CCED into a refundable tax credit corrects numerous flaws in the existing policy and directly addresses the issue of affordability for parents, he notes. The pair also advocated for an increase in federal childcare funding to address supply issues, although they argued against a “Big Bang” approach of the sort delivered by the Trudeau government.

Searching for common ground: O’Toole’s proposal for a refundable, progressive childcare tax credit finds its inspiration in a recent C.D. Howe Institute report by former Conservative advisor Ken Boessenkool (left) and former federal Liberal staffer Jennifer Robson (middle).

The CCED’s biggest problem as currently constituted is that it’s a tax deduction (a reduction in income subject to tax), making it much more lucrative for families with higher incomes and higher tax liabilities. Lower-income families – those struggling the most to afford what their kids need – pay little tax to begin with, making tax deductions less significant to their budgets. “The idea that the more money you make, the larger your tax deduction for childcare will be, seems a bit strange in this day and age,” Boessenkool says. Turning it into a progressive and refundable tax credit rectifies this issue. It also addresses what he calls the “misogynistic” nature of the existing system, given that the tax deduction can only be applied against the income of the lower-earning spouse, typically the wife. A tax credit paid out as cash throughout the year will not only distribute more money to those who need it, but in a more equitable fashion.

Boessenkool and Robson’s paper leaned heavily on earlier work by University of British Columbia economist Kevin Milligan and C.D. Howe Institute researcher Alexandre Laurin, who calculated the cost of shifting the CCED to a tax credit at approximately $1.2 billion in 2017. With O’Toole vowing to scrap the Liberals’ $30 billion-over-five-years national childcare plan if elected, the Tories’ critics are also complaining such a policy will shortchange Canadian families by reducing the overall federal spend on childcare related activities. “Less is less,” the Toronto Star editorial whinged. Not necessarily.

Family Statistics

Consider the CCPA’s claim that an “average family” in 32 Canadian cities will be better off with $10 per day daycare than a tax credit. This depends on how you define “average.” According to Statistics Canada, before Covid-19 wreaked its chaos, approximately 60 percent of Canadian children under the age of six were in childcare arrangements outside the parental home. Slightly more than half of those kids attended a formal childcare centre. The rest spent their days in the care of relatives, friends or home daycares.

This childcare math means only 31 percent (52 percent of 60 percent) of all children were in institutional childcare centres pre-Covid. We can thus assume fewer than one-third of Canadian families can expect to directly benefit from a national childcare scheme. The large majority of parents – both the 40 percent who stay at home with their children and the remainder who pay for care away from formal childcare centres – should expect nothing from the Liberal plan. This will be particularly so in the first five years, when nearly all the promised $30 billion is to be spent subsidizing existing spaces.

How do you define average? Cardus senior fellow Andrea Mrozek calls it “disingenuous” to claim that an “average family” will reap large benefits from subsidized institutional childcare when only a third of all children attend a formal childcare centre. (Source: Pro Woman Pro Life)

“It is disingenuous to say the Liberal plan offers broader benefits when we know it will only reach less than a third of all families,” says Andrea Mrozek, senior fellow at Cardus, a family policy think tank. “They are only subsidizing one part of the entire ecosystem of care.” Further complicating the fairness of a national childcare plan is ample evidence from Quebec that shows a disproportionate share of heavily subsidized daycare spaces tend to be grabbed by well-off families, who are generally better able to negotiate complicated application processes and jump to the head of waiting lists.

A 2006 C.D. Howe study concluded, “The Quebec program heavily subsidized the cost of childcare for middle- and high-income families.” Similarly, an Institut de la statistique Québec report found that, “Children from disadvantaged families are less likely to be regularly in child care.” The perversity of subsidizing childcare for rich families at the expense of lower-income parents leads Mrozek to conclude that universal national daycare “is a really inefficient and inequitable way to help families.”

In contrast, O’Toole’s plan offers assistance to all families who choose to pay for childcare outside the home, without causing access problems. It focuses its biggest benefits on lower-income families who need it the most, rather than disproportionately helping the rich. And it allows parents to make their own choices about how to care for their kids. It thus avoids all the equity and fairness issues inherent to the Liberal and NDP plans. “To pretend that there is only one kind of childcare that is acceptable for government funding is a grave error,” snaps Boessenkool. “The idea of choice in childcare should be fundamental. Canadians want to decide what is best for their own families.”

It’s Good to be Home

Brenda Burns has been offering choice in childcare to Ottawa parents for nearly 29 years. Burns runs her own home daycare and is also board president of the local Child Care Providers Resource Network, an online service that offers educational support to home daycare providers and matches families with home daycare services in their neighbourhood.

Home daycare exists on a continuum between the poles of parental at-home care and institutional childcare and is rarely discussed in childcare debates. Providers operate out of their home, often while also looking after their own children. Some home daycares in Ontario are licensed and regulated by government-approved home daycare agencies, while others, such as Burns, operate independently with the requirement that they look after fewer children than licensed homes.

“No two home daycares are alike,” says Burns. “It is an option that a lot of parents prefer because we offer a family-like atmosphere with smaller ratios.” The local nature of most providers is also attractive for families, both for convenience’s sake and because informal neighbourhood networks often provide an easy way to keep track of who is doing a good job and who is not.

Happy at home: Brenda Burns has been running a home daycare in Ottawa for nearly 29 years and can’t ever recall having a vacancy; yet the Liberal’s national childcare plan poses an existential threat to her entire sector. (On the right, a treasured drawing made by a former daycare child shows Burns at work, and hints at the close connections she makes with her young charges.)

Within her community, Burns’ childcare services are so much in demand that she can’t recall ever having a vacancy. Local parents often leave unsolicited letters in her mailbox beseeching her for a spot. And she isn’t cheap. Burns charges $60 per day, more than the $54 per day the CCPA claims is the going rate for institutional toddler care in Ottawa. Clearly her parent-customers are willing to pay extra for what she provides.

Home daycares such as Burns’ make up 20 percent of all childcare arrangements in Canada, a significant share of the landscape. Yet her entire sector is threatened by the Liberal plan that privileges non-profit institutional care at the expense of all other options. Will anyone be prepared to pay $60 per day for Burns’ service when the government is offering its own services at one-sixth the price? “It certainly poses a risk to independent childcare businesses like me,” worries Burns. “They call it a national childcare plan, but it doesn’t include everyone. I think childcare should be equitable for all families.”

The Conservative tax credit avoids creating an existential threat to Burns’ livelihood. Since the tax credit would be available to all parents who use out-of-home childcare regardless of who they pay for the service, it allows a variety of options to flourish outside the narrow range of institutional childcare centres. “It is not dependent on whether your child is enrolled in a non-profit childcare centre,” she says. “And it immediately puts money into parents’ pockets.” 

As for complaints from academics and childcare advocates that the home daycare sector fails to provide “high quality” childcare and should thus be discouraged, if not eradicated, Burns takes great offence. “I consider it a privilege to be part of a child’s life. If parents find a situation that works for them, and they’re happy with it, then that to me is quality childcare,” she says. Burns adds that she’s still in touch with some of her former toddler clientele 20 years or more after they’ve gone on to public school and the wider world. Lifelong personal connections like this are decidedly rarer at the unionized, non-profit institutional childcare centres so beloved by their promoters.

The Long Shadow of Quebec

As two competing and radically different visions of childcare battle it out for approval from federal voters, one of the great curiosities of this electoral clash is that both the Liberal and Conservative platforms find their roots in La belle province. The link between the Liberals’ $10 per day childcare plan and Quebec’s experience with its $8.50 per day Centres de la petite enfance (CPE) is obvious. In its 2021 federal budget, the Liberal government referred to Quebec as a “pioneer” in the childcare field. The province has also been exempted from any conditions imposed on its share of the upcoming federal childcare cash; it is in line for an extra $6 billion over five years from Ottawa with no strings attached. Less well-known, however, is the fact that the Tories’ latest tax credit scheme is also lifted straight from Quebec. To understand why requires a bit of history.

The cure for a political headache: High demand for heavily-subsidized, low-cost childcare in Quebec led former Liberal Premier Jean Charest (left) to create a refundable, progressive tax credit for parents in 2009 to ease supply concerns; within a year the unsubsidized, for-profit sector had nearly doubled in size. (Source of left photo: Letartean, licensed under CC BY 3.0)

When the province’s Parti Québécois government unveiled its then-$5 per day childcare system in 1997, it was meant to be entirely non-profit and government-funded, just as many childcare advocates promote. But a decade later, demand for the low-cost (but expensive to build) CPEs was far outstripping supply and a province-wide waiting list had become a massive political headache. The solution from the government of Liberal Premier Jean Charest was to provide parents with a new option by welcoming back the private sector. The result was a progressive, refundable tax credit unveiled in 2009. Families could choose between receiving a government subsidy through a CPE, or getting a tax credit and applying it against the cost of space in a for-profit centre.

A big bill to pay: Cardus research suggests that the true cost of the Liberals’ national childcare plan could far exceed current federal commitments and that cash transfers to all parents, such as the Canada Child Benefit, could suffer as a result.

The tax credit had an immediate impact on supply by energizing the entrepreneurial sector. From 2009 to 2010 the number of non-subsidized, privately-owned daycare spaces grew spectacularly from 6,954 to 11,173. Today, Quebec’s unsubsidized sector supplies over 70,000 out of a total 307,000 childcare spaces in the province. Beyond satisfying a wider range of parents, the Quebec experience also demolishes complaints from daycare advocates that tax credits have no impact on spaces. That O’Toole’s tax credit is identical to Quebec’s successful innovation is confirmed by Pierre Fortin, professor emeritus of economics at Université du Québec à Montréal and a vocal supporter of the CPE system. “It looks the same as the 2009 Quebec tax credit,” Fortin stated via email. “No apparent difference.”

If there’s another lesson to be learned from Quebec, it’s that government-funded childcare tends to cost a lot more than originally promised, which creates knock-on effects elsewhere. Mrozek’s research for Cardus suggests that despite its eye-popping $30 billion price tag over the next five years, the current Liberal proposal will be insufficient to meet all its stated objectives and that an additional $4 billion to $23 billion per year will be required to fulfill all its promises. If so, that money will have to come from somewhere.

Experience from Quebec suggests governments deal with rising childcare costs by curtailing cash transfers to parents. After the unveiling of the CPE system in 1997, academic research has shown over 70 percent of Quebec families received less in provincial cash transfers as government spending was increasingly funneled into resolving the massive waiting list.

If such a process plays out on a national level, Mrozek worries that an obvious target would be the very successful Canada Child Benefit (CCB). The CCB is the successor program to Harper’s UCCB that was enriched by Trudeau in 2016; it currently distributes $27 billion per year to Canadian families and is widely recognized as a major factor in reducing child poverty. Starving the CCB of future increases would be one way to free up more money for future childcare transfers, but at the cost of potentially greater child poverty. Another solution could be to eliminate the CCED altogether. Either possibility would mean less money for families who choose something other than institutional childcare for their children.

Parental Calculations

With the battle lines drawn more clearly on childcare than most other issues in the 2021 federal election, the file could prove crucial in differentiating the two main parties in the minds of voters with young children. If so, how might the electoral calculus shake out?

Rational choice voting in action: The childcare debate may come down to parental calculations about the potential gains from institutional childcare as compared to a direct cash payment. (Source: Shutterstock)

Parents who prefer institutional childcare and consider themselves likely to be able to take advantage of $10 per day care should greatly prefer the Liberal plan, as it delivers a much bigger individual payoff. CCPA figures suggest annual savings of up to $8,000 per year for families using childcare in large urban centres such as Toronto from the Liberal or NDP plans. On the other hand, a larger number of parents may find they prefer the Conservative tax credit, even though it provides them with a smaller potential reward since it encompasses a broader range of choices. (Of course, parents who choose to stay home with their own infants or toddlers will receive nothing from either option.) The outcome could thus hinge on the relative size and commitment of each group and can be considered a classic example of what political theorists call rational choice voting.

Beyond personal gain, Boessenkool suggests a second major factor will play a role in voter calculations – credibility. “Since 2006 Canadians have had experience with politicians promising to increase the cash they receive because they have children. And they have seen the results with their own eyes,” says the former Conservative advisor, referring to both Harper’s UCCB and the Trudeau-enhanced CCB. “Canadians have also had plenty of experience with politicians promising to create a low-cost, government-funded national daycare system. And they’ve never seen anything as a result.” Here he is referring to previous, failed federal Liberal promises to create universal childcare in 1997 and 2006 as well as 2021. While voters in general may tell pollsters they like the idea of cheap and plentiful government-funded childcare, skepticism may lead parents with young children, who are much more likely to make a decision based on childcare policies, to opt for the more tangible and achievable option of a cash transfer. A bird in the hand, so to speak.

No more “Beer and Popcorn”? The famous insult by Liberal strategist Scott Reid (pictured) during the 2006 election proved to be a pivotal moment in closing the gender gap between the Martin Liberals and Harper Conservatives; the Trudeau Liberals are unlikely to repeat such a blunder in 2021.

An Angus Reid Institute poll commissioned by Cardus prior to the election seems to bear this out. The pollster asked parents with children under the age of six already attending some form of childcare what they would prefer in additional government support. All possible policies – ranging from a new Liberal-style national daycare system to specific funding for at-home parents to increases in disability payments – received strong support, signaling a broad desire among these parents for greater attention from Ottawa. But the option of converting the existing child-care expense deduction into a refundable tax credit was the clear winner, out-polling $10 per day daycare 78 percent to 68 percent.

As the electoral debate between choice and childcare plays out once more, one difference this time around may be that pundits have at least learned to hide their contempt for parents who prefer something other than institutional childcare. The “Beer and Popcorn” comment was “definitely a pivotal moment in the 2006 election,” recalls Boessenkool. “It was enormously important, particularly for female voters.” In 2021 the level of debate has not sunk to such depths. And for good reason. “I think the Liberals today are very aware of the damage it caused them back then,” he adds.

Perhaps fewer insults about parental choice can be considered progress of a sort.

Peter Shawn Taylor is senior features editor of C2C Journal. He lives in Waterloo, Ontario.

Source of main image: Shutterstock

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