How will the new federal Child Care Allowance work?

The Conservative government intends to scrap the Liberal government's $11-billion national child-care development agreement, an infusion that would have created thousands of new daycare spaces. Instead, the Conservatives plan to institute a less costly and less effective alternative: a $1,200 child-care benefit to go to parents of kids under age six. Unfortunately, only a tiny percentage of families will enjoy the full benefit.

The Child Care Allowance will be paid monthly with the Canada Child Tax Benefit (CCTB) and National Child Benefit Supplement (NCBS), both of which will remain. However, unlike the cctb base benefit (aimed at middle- and low- income families) and the NCBS (a supplement for low-income families), the Child Care Allowance benefit won't be determined by income. In theory, every family will get $100 per month per child.

Problem is, the allowance may be taxable. The Caledon Institute – a left-leaning social-policy think tank – calculates that, in Ontario, a single parent with income in the range of $27,000 to $29,000 would end up with only $481; a two-income two-parent family earning $100,000 would keep $778, while a one-income two-parent family earning $50,000 keeps $1,049. This is because the allowance income may impact GST credits and other benefits in addition to triggering additional tax.

For working moms, the Tory plan is vastly inferior to the Liberal plan, which would have created desperately needed high-quality daycare spaces. According to the Child Care Advocacy Association of Canada, there is currently existing daycare for only 16 per cent of young children, so giving parents more money for daycare that does not exist is pointless.

Almost everyone agrees this allowance is superior in one respect: it recognizes the financial sacrifices moms (primarily) make to stay home with their children. In fact, under the current plan, only stay-at-home moms will be able to keep most of their allowance, while working moms will have a lot of it taxed back and may also lose some of their Child Tax Benefit or GST credits.

Without a change in policy, most Canadian families receiving social-assistance payments in many provinces, including Ontario, will not benefit from the Child Care Allowance. This is because those cheques are currently reduced by the amount of any federal benefits a person or household receives. This means Prime Minister Harper's promise to make the child-care benefit universal will be true – except to the most needy. If we are serious about improving early childhood care development, this needs to change