OFL - Code Blue Update: Budget Analysis

March 20, 2007

Our Reaction
The Conservative budget is cutting $1 billion that were previously committed to make early learning and child care accessible to families.
The Conservative government is sticking to its failed child care plan by giving tax credits to businesses for the creation of workplace--and likely for profit--child care spaces even though all the evidence tells them it won't work. In fact, the Conservatives are probably including this tax break knowing there will be no take-up. This way they can say they stuck with their original plan without having to spend a penny.
The Conservative government is planning to spend $1.5 billion on a new flat child tax benefit. The cost of the government's so-called universal child care allowance is estimated to be $2.46 billion in 2007-2008. This means a total of just under $4 billion in 2007-2008 alone will be paid out in payments to individuals. If this money was directed to child care services, it would be almost enough to operate a universal child care system for all 3 to 5 year-olds with federal funds alone.
The Conservative budget is all about transferring responsibility for services to individuals (in the form of individual tax credits) and to provinces/territories (in the form of unrestricted, unaccountable transfer payments) and this will destroy the future of early learning and child care.
What we got
Cancellation of $1.2 billion in transfers to provinces/territories that was to take effect on April 1,2007, as well as the cancellation of $1.2 billion in each of the next two years.
A 25 per cent investment tax credit to businesses that create child care spaces in the workplace to a maximum of $10,000 per space created.
$250 million in 2007-2008 to provinces/territories for the creation of spaces.
Starting in 2008-2009, the $250 million transfer will be rolled into the Canada Social Transfer to the provinces/territories on a per capita basis. Reporting and accountability requirements are to be worked out with the provinces/territories.
Starting in 2009-2010, the transfer through the CST will be increased by 3 per cent each year.
In their costing of their support for child care, the Conservatives are rolling into the $850 million that is already in place under the Canada Social Transfer as agreed to through the Early Childhood Development Agreement in 2000 and the Multilateral Framework agreement in 2003. Let's not forget that hardly any of the ECDA funds went for child care, and none of this money is new.
The budget also allocates $1.5 billion to a new child tax benefit. The Conservatives describe this as federal support for early learning and child care but, like the so-called universal child care allowance, it has nothing to do with child care.
Watch out
The budget specifies that the $250 million transfer to the provinces/territories in 2007-2008 is for the creation of spaces not their expansion. It is not clear that there will be any accountability or spending requirements.
Starting in 2008-2009, any strings attached to the $250 million will have to be discussed with the provinces/territories.
The transfer will not be increased until 2009-2010 after which it will increase by 3 per cent each year, the established Canada Social Transfer escalator.

The previously negotiated transfers under the Multilateral Framework agreement stay in place under the Canada Social Transfer but are not being increased until 2009-2010 when all the transfers under the CST will go up by 3%.